Court Opinion

ID: 9551440
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:53:27.886107+00
Date Added: 2024-06-11T15:23:50.437495
License: Public Domain

THE COURT.
On his petition for a rehearing the appellant criticizes that portion of the opinion treating his plea that the transfer of the corporate shares was made in fraud of creditors.  He fails to distinguish between a case of fraud and a case of transfer in trust to escape future liability. Such a transfer may be made in good faith and without fraud. But if fraud is the issue it must be alleged and proved, not presumed or inferred from proof of the transfer alone.
In Leviston v. Tonningsen, reported in 212 Cal., page 656 [299 Pac. 724], the trial court found that the transfer of the shares by Patton and Tonningsen to Bone “was a transfer *729made whereby the beneficial ownership o£ said shares still remained in said Patton and Tonningsen, and said Bone received said shares simply to hold the same in trust for said Tonningsen and said Patton”. Also that “the purpose and object sought to be accomplished by said Patton and Tonningsen in transferring said shares was to avoid liability as stockholders in said corporation, which liability became a matter of apprehension”.
The Supreme Court expressly affirmed the finding as to the beneficial ownership of the shares, and also stated that the transfer was made “in order to evade stockholders’ liability”. The finding followed the pleading of the amended complaint in intervention. There was no issue, finding, or proof that it was made to “defraud” creditors, or that any creditor was defrauded or hindered in any degree.
There is a wide difference between a transfer of property to avoid future liability and a transfer made to defraud creditors. It is when a fraud has been accomplished that the courts will deny relief to the transferor. Here the trial court found that the transfer did not operate to escape stockholders’ liability “for either the existing or future debts of the corporation ; that no claim was ever made against the stockholders of said corporation for stockholders’ liability and no creditor of said corporation was ever defrauded or injured by said transfers”.
It is a simple proposition of law that the transfer would not relieve either Patton or Tonningsen from liability accruing while they were stockholders. Bone was a man of means and the transfer to him did not defeat the rights of creditors of the corporation. But it seems necessary to emphasize that the issue here is not the “intent” of the transfer, but the issue is one of fraud. No evidence of fraud was offered, while the evidence supporting the finding above noted has no conflict.
The petition for a rehearing is denied.
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 October 10, 1935.