Swanson v. Skiff

Opinion

REYNOSO, J.

The trial court ruled that defendants were obligated to pay on a promissory note they executed. They argue that there was no

[807]

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.