Allen v. Freear

KERRIGAN, J.

This action was brought to have a trust declared in certain property.

The substance of the facts as disclosed by the findings shows that on the eighteenth day of April, 1914, L. L. Bateman was the owner and in possession of certain personal property described as all the stock in trade, including groceries and general merchandise, in a certain store located in Kern County, the value of which was approximately $4,000. Bateman was financially involved, and on the day last mentioned he entered into an agreement with the defendant Freear to transfer the business over to him. Notice of his intention so to do was recorded and pursuant to such notice a sale was subsequently made. The only consideration for this transfer was that Freear should take possession of the business, conduct the same, and pay off Bateman’s indebtedness, upon the happening of which event Freear was to reconvey to Bateman a one-half interest in the property. At the time of the transfer Freear was familiar with the different claims against Bateman. Among these was one held by plaintiff and one of the defendants, Stephenson. Allen and Stephenson at the time of the transfer were guarantors on two promissory notes given by Bateman. These notes aggregated the sum of $1,500, and as such guarantors Allen and Stephenson were compelled to, and did subsequently, pay the same, Allen paying two-thirds and Stephenson one-third of the amount due thereon.

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After acquiring the business in the manner indicated Freear conducted the same, but in violation of his agreement to pay off the indebtedness he retained the income arising therefrom, and finally sold the business to one Carlson. As part of the purchase price Carlson gave a note to Freear for the sum of $2,500, which note was secured by a mortgage upon certain real property. Before the maturity of this note Freear transferred the same to the Produce Savings Bank to secure his personal indebtedness. This mortgage was subsequently foreclosed by the bank. After the bank had satisfied its claim a surplus remained in its hands amounting to the sum of $866.50, which sum was ordered by the court to be deposited with the county treasurer to await such order as might be made in this action. The complaint herein prayed that this fund be adjudged to be held by defendant Freear in trust for the payment of the claims of plaintiff and other creditors of Bateman.