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Adams v. Merced Stone Co.

Supreme Court of California
178 P. 498 (1917)


Samuel Prather (Samuel) held a seat on the board of directors and leadership of Merced Stone Co. (Merced) (defendant). In this position, Samuel had access to Merced’s books and financial statements. Merced owed a significant monetary debt to Thomas Prather (Thomas), Samuel’s brother. When Thomas was about to die, he allegedly made a verbal gift of the debt he was owed by Merced to Samuel. Thomas knew of Samuel’s position in leadership in Merced and thus knew of Samuel’s ability to change Merced’s financial statements to reflect that Merced was indebted to Samuel instead of Thomas. The possibility that Samuel would change Merced’s financial statements in such a manner was never discussed between Thomas and Samuel, however. There was no evidence that Thomas actually delivered his interest in the debt owed by Merced to Samuel beyond Samuel’s testimony regarding that fact. After Thomas died, Samuel took over Thomas’ interest in Merced. Adams (plaintiff), executor of Thomas’ estate, brought suit against Merced in California state court seeking to recover Thomas’ interest in Merced’s debt. The trial court entered judgment for Merced, and Adams appealed.

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