Herman v. Hecht

Citations

• 116 Cal. 553
• 48 P. 611
• 1897 Cal. LEXIS 587

Syllabus

<p>Corporations—Promissory Note—Stockholder’s Liability—Transfer of Obligations between Partnership and Corporation—Loan to Corporation — New Note.—Where upon the sale of the property of a corporation to a partnership, the partnership assumed the payment of a note of the corporation to a bank, and, at maturity of the note, substituted the partnership note to the bank for the amount of the debt; and afterward, upon a repurchase by the corporation from the partnership, the corporation assumed the payment of the partnership note, and its directors authorized the borrowing of money from the bank, under which authority the note of the corporation was given to the bank for the amount of the partnership note, in payment thereof; such new note of the corporation was in effect the loan of money from the bank to the corporation, with which to pay the note of the partnership, and constitutes an original indebtedness upon which those who were stockholders at its date are liable for their proportion.</p> <p>Id.—Maxims—Substance of Transaction—Vain Things not Required —Transfer of Money not Essential.—The law looks at the substance of a transaction, and does not require vain things; and it is not essential to a loan of money from a bank to enable the borrower to pay the note of another to the bank, that the money shall be actually transferred to the borrower by the bank, and then repaid to the bank upon such other note, but it is sufficient that the note paid be surrendered by the bank to the borrower, and that the note of the borrower to the bank be substituted in its stead.</p> <p>Id.—Immaterial Variance—Pacts Alleged in Answer. —Viewing the transaction not as a loan from the bank, but as the substitution of the note of the corporation for the surrendered note of the partnership, the variance from a complaint alleging that the note was given for money borrowed, is immaterial, where the facts of the transaction are set forth in the answer, showing that the note was given for an