University of Southern California v. Bryson

This is an appeal from a judgment for plaintiff on a note representing a $200,000 sub

Sarah P. Livingston executed and delivered to the University the following note:

“Estate Note Sarah P. Livingston

“University of Southern California Million Dollar Jubilee Campaign.

“Los Angeles, May 24th, 1918.

“In consideration of my interest in Christian education and in consideration of others subscribing toward raising of a Million Dollars for endowment and equipment for the University, I hereby subscribe and will pay to the University of Southern California, at Los Angeles, California, the sum of

Two Hundred Thousand........Dollars ($200,000.) on the following terms and conditions: t

‘ ‘ 1. The entire sum of One Million Dollars asked, shall | be pledged on or before June 12, 1918.

“2. This subscription shall be. due and payable one (1) day after my death, and out of my estate.

Name: Sarah P. Livingston

“Witness: John Hedley

“1245 Stevenson Ave., Address: Redondo Beach District: Pasadena, Cal. Charge: California.”

(Indorsement in writing on reverse side.)

“The sum of Two Hundred Thousand Dollars ($200,000) is donated to the Board of Trustees, University of Southern California, with the distinct provision that the full amount shall be used as an endowment fund to further the work of Foreign Missions, in the preaching of the Gospel to people in heathen countries, as may be hereafter determined by the Board of Trustees, University of Southern California.

“ (Signed) Sarah P. Livingston.

“May 24th, 1918.

“Witness: John Hedley.”

The entire fund of $1,000,000 was subscribed before June 12, 1918. Notice of an acceptance of the Livingston subscription was sent to her. Relying upon the payment of these notes, an administration building was commenced, college courses enlarged and obligations incurred by the university. Mrs. Livingston died May 25, 1923. Upon proceedings duly had an administrator of her estate was duly

The appellant contends that (1) the subscription note was without consideration and is therefore nudum pactum (2) the condition of the notes to secure pledges for the aggregate sum of $1,000,000 was not fulfilled, (3) the doctrine of estoppel may not apply since the payee did not perform any acts or incur obligations in anticipation of the fulfillment of the specific purpose for which the particular subscription was made, (4) the purpose for which the pledge was made is not within the authorization of the university charter, and (5) the creditor’s claim upon which the action is founded will not support a plea of estoppel.

The last paragraph of the foregoing copy of the subscription note or agreement was written at the request and in the presence of Mrs. Livingston by a minister of the Methodist church, and was executed at the same time and as a part of the original instrument. The entire document must therefore be construed together in determining its character and effect. (Sec. 1641, Civ. Code; McAuliff v. McFadden, 42 Cal. App. 505 , 511 [ 183 Pac. 870 ]; 8 C. J. 191, sec. 323.)

It is asserted that the written portion of the subscription note in the present case is repugnant to the purpose for which the general university fund was raised, as appears from the printed portion of this and other notes uniform in that respect which were executed by the subscribers, and that the indorsement on this note specifically designates the nature of the transaction as a “donation,” which means a gift and precludes the possibility of contending that it was founded upon a consideration. (Noe v. Card, 14 Cal. 576 , 598.)

Where a contract is partly written and partly printed, and the written matter is repugnant to the printed portion, the former will, control. (Sec. 1651, Civ. Code; sec. 1862, Code Civ. Proc.) It is only when written and printed portions of the same document are repugnant, however, that

We think that the language of the written indorsement on the note in this case neither destroys its validity on the ground that it requires an application of its funds to a purpose different from that which was designated in the pledges for the balance of the general jubilee endowment fund, nor for the reason that it designates a purpose beyond the scope of authority which is conferred upon the university by its charter. The University of Southern California was organized as a denominational institution "under the control and management ... of the Southern California Conference of the Methodist Episcopal Church.” It was empowered to receive and hold property "for educational purposes ... or for the endowment of the corporation or

In anticipation of the payment of these subscription notes into the general jubilee fund, of which the Livingston contribution was a substantial part, a new administration building was commenced in 1919 and completed in 1921 at an expense of $620,000. In this building a classroom was assigned for teaching religion and preparing students for missionary work. In anticipation of the payment of the Livingston contribution in particular the work in the department of the school of religion was greatly enlarged. Classes for the study of the aims and needs of foreign missions were added, together with instruction in the languages and customs which prevail in such fields. The plan for education in this department was reorganized under the title of “The Church and Its Program.” Dr. von KleinSmid, the president of the university, testified that these courses were intended “for the preparation of young men and young women for service in foreign missions.” The board of trustees approved this plan. The missionary course included study under Dr. Fisher of “Heroes of the Mission Fields; their history and times; their consecration, preparation, problems, methods, work and achievement.” A library, equipment and several instructors were added to this department. The increased cost of this entire change in the religious department could not be paid from the Livingston subscription alone. But these changes were made and the increased cost of the department incurred in anticipation of and in reliance upon the substantial aid of her contribution. The president of the university said: “The entire program (affecting the church and missions) was in part relying on the Livingston donation.” It was unnecessary that the obli

The activities of the university above mentioned were in furtherance of the work of foreign missions; they were in compliance with the conditions of the Livingston note and not in conflict with the purpose for which the general endowment fund was raised, or the authorized powers of the educational institution.

It is contended that the instrument in question is testamentary in character; that it is a mere executory promise, without consideration, to give a sum of money to the university, which was revocable at the option of the promisor at any time before acceptance, and which was canceled by her death.

A note may be valid as a non-negotiable instrument although it does not contain all the provisions necessary to make it negotiable. (8 C. J. 41, subd. 20.) A written instrument is presumptive evidence of consideration. (Sec. 1614, Civ. Code.) The burden of showing a want of consideration sufficient to support the instrument lies with the party seeking to invalidate or avoid it. (Sec. 1615, Civ. Code.)

The note was not invalid because it was made payable out of the estate of the maker thereof, one day after her death. A negotiable instrument is deemed prima facie to have been issued for a valuable consideration. (Sec. 3105, Civ. Code.) An instrument which is negotiable in form is not rendered testamentary or non-negotiable merely because it does not mature until after the death of the maker. (19 Cal. Jur. 814, sec. 17; 1 Daniel on Negotiable Inst., 5th ed., p. 53, sec. 46; Buchtel College v. Chamberloix, 3 Cal. App. 246 [ 84 Pac. 1000 ]; Nassano v. Tuolumne Co. Bank, 20 Cal. App. 603 [ 130 Pac. 29 ]; 3 R. C. L. 907, sec. 94.)

A promise to pay a subscription is ordinarily a mere offer which, in the absence of a consideration therefor, may be withdrawn at any time before acceptance. Under such circumstances the death of the promisor revokes the pledge. A mere individual promise to subscribe to a cause is not usually supported by a consideration and is therefore nudu,m pactum and unenforceable. (23 Cal. Jur. 954, sec. 2; 25 R. C, L. 1399, sec. 6; Grand Lodge I. O. G, T. v.

A mutual promise concurred in by several individuals to contribute to the payment of an aggregate sum for the benefit of a charitable, religious or educational institution in which they are all interested, is generally held to support an adequate consideration authorizing its enforcement by the promisee. (Christian College v. Hendley, 49 Cal. 347 ; 37 Cyc. 488; 6 R C. L. 676, sec. 84; 38 A. L. R 906 , note VI.) This doctrine, which is termed “a promise for a promise,” is criticised by certain text-writers, but it is evidently approved by the California courts. The Christian College case, supra, has been favorably cited on this point in West v. Crawford, 80 Cal. 19 , 32 [ 21 Pac. 1123 ] and in Matzen v. Morton Bldg. Co., 28 Cal. App. 330 [ 152 Pac. 317 ], The principle is also supported by a large number of authorities which are cited in support of the text in Ruling Case Law, supra, and in the Permanent Supplement thereto.

Appellant claims this is not the law in California; that the case of Grand Lodge I. O. G. T. v. Farnham, 70 Cal. 158 [ 11 Pac. 592 ], overrules the Christian College case. We cannot agree with this assertion. The Grand Lodge case is clearly distinguishable from both the Christian College case and the present action. The facts which appear in the Grand Lodge case indicate that Farnham signed a mere subscription paper agreeing to pay $1,000 toward building a Good Templars’ Home for Orphans. Other subscribers at. the same time signed similar papers. There is nothing in the record to show that the document which he signed had any reference to other subscription papers, or was conditioned upon the raising of any specific fund, or upon other subscribers participating therein. No mutual or reciprocal obligation is mentioned. Unlike the. present case, no reference was made to the execution of other pledges, or to the

While American authorities are not in entire harmony as to the validity of these subscription agreements, the modern trend and the weight of authorities support the theory that the reciprocal agreements of the several subscribers or the subsequent performance of labor or incurring of obligations on the part of the promisee in reliance upon the pledge to pay, furnishes a sufficient consideration therefor, or an estoppel to deny the validity thereof. Upon the contrary, English cases regard subscriptions to charity and similar causes as mere promises without consideration which may be withdrawn at any time before acceptance, and which are, therefore, nudum pactum. (Re Hudson, 54 L. J. Ch. (N. S.) 811.) The earlier American cases follow this rule. The trend of modern authorities holds the contrary. Later authorities tend to uphold these subscription agreements for the benefit of charitable and educational institutions. In 38 A. L. R. 869 , note, it is said, “The tendency now is to uphold subscriptions as valid and enforceable whenever that can be done without overstepping entirely established rules requiring consideration to uphold executory contracts. . . . Consideration is supplied where upon good faith of the subscriptions moneys have been expended, liabilities incurred, or work performed. . . . Other courts have found consideration in the mutual promises of the subscribers." Some cases distinguish between a mere promise to pay a specified sum regardless of the aggregate fund to be raised and a promise

Section 1605 of the Civil Code defines the term consideration as any benefit conferred on the promisor or any prejudice suffered by the promisee.

When the subscription of an individual aids the organization, endowment or maintenance of a local charitable, religious or educational institution in which he is interested, it may be said he receives an indirect benefit therefrom. These are semi-public organizations which are recognized as beneficial to society. (Nebraska Wesleyan University v. Griswold,, 113 Neb. 256 [ 38 A. L. R. 858 , 202 N. W. 609 ] ; Amherst Academy v. Cowls, 6 Pick. (Mass.) 427 [ 17 Am. Dec. 387 ].) So, also, it may be said that when an institution relying upon a promise to pay a specific sum for a particular purpose is induced thereby and does expend money, perform labor or incur obligations incident to the purpose for which the money was pledged, it necessarily suffers prejudice in so doing. This detriment is deemed by section 1605 of the Civil Code to constitute an adequate consideration upon which to enforce the agreement.

Acts performed and obligations incurred by a promisee in reliance upon the payment of a subscription note renders the agreement enforceable and estops the promisor from refuting its validity. (25 R. C. L. 1401, sec. 8; 37 Cyc. 486-B; Lasar v. Johnson, 125 Cal. 549 [ 58 Pac. 161 ]; Buchtel College v. Chamberloix, 3 Cal. App. 246 [ 38 A. L. R. 881 , note, 84 Pac. 1000 ] ; Furman University v. Waller, 124 S. C. 68 , 33 A. L. R. 615 , note 625 [ 117 S. E. 356 ].)

The appellant contends that the changes in the religious program of the university, the labor performed and the obligations incurred in the construction of the administration building and otherwise were not solely in anticipation of the payment of the Livingston note, but were partially in reliance upon the payment of other pledges and therefore furnished no ground for estoppel. It is true that this performance was only partially in reliance upon the payment of the Livingston note. It is, however, not necessary that a particular subscriber’s promise should be the sole inducement for the performance of work or the incurring of obliga

It is asserted that the condition of the note that $1,000,000 should be pledged for the endowment and equipment fund of the university was not complied with. We cannot agree with this. The aggregate sum of $1,148,834 was subscribed. This sum included the $200,000 note in question, which was primarily a contribution to the endowment and equipment fund from which the obligations for maintaining a department for religious training and for furthering the work of foreign missions were paid. This note was therefore properly included in the general fund. The aggregate amount also included a note of $100,000 signed by W. T. Watts, which is challenged. In January, 1919, after the fund had been completed, Mr. Watts and the university entered into a written agreement by the terms of which real property was conveyed to the university, apparently, in satisfaction of this note, conditioned upon the grantor retaining the rents and income therefrom during his lifetime. There is evidence that this property was worth “much more than $100,000 to the University.” This was not denied, for, when plaintiff called a witness to establish its value, this colloquy occurred between counsel: “Mr. Scarborough: We have testimony here that the value of the property was over- $100,000. Mr. Holbrook (attorney for defendant) : ... If it makes any difference, it amounted to more; it does not make any difference whether it amounted to less.” It should therefore be assumed that the defendant accepted this property as of a valuation in excess of $100,000. Two other items are challenged, to wit, $57,464 in notes for which the university was obligated to extend scholarship privileges under which it waived the usual tuition charges. There were also subscriptions amounting to $32,800 to which obligations on the part of the university were imposed to pay annuities to the makers thereof in the form of interest. The last two items aggregated $90,264. While the principal represented by the last two classes of

Finally, it is contended the form of the creditor’s claim was insufficient upon which to maintain this action, and that there was a fatal variance between the allegations of the complaint and the evidence adduced, in that the complaint failed to adequately set out the particulars upon which the claimant relied, to wit, the doctrine of estoppel which would be raised by the proof of the performance of labor or the incurring of obligations by the payee in reliance upon the payment of the note.

The creditor’s claim contained a complete copy of the note upon which the action was founded, together with the statement that the subscription note “was delivered to and accepted by the University . . . upon the terms and for the purposes therein set forth, and that the entire sum of $1,000,000 asked was pledged on or before June 12, 1918, in fulfillment of the conditions thereof ...” This was a sufficient compliance with section 1494 of the Code of Civil Procedure. (11 Cal. Jur. 704, sec. 411; Grocker-Woolworth Nat. Bank v. Carle, 133 Cal. 409 [ 65 Pac. 951 ] ; Pollitz v. Wickersham, 150 Cal. 238 , 249 [ 88 Pac. 911 ].) The consideration of the note was presumed. Nor was there a variance in the proof of the allegations of the complaint which set out the note in full and the nonpayment thereof and recited that “upon the faith of and relying upon the said subscription, with other subscriptions to said fund, the plaintiff . . . erected a building and purchased equipment for the same . . . and employed teachers, and equipped a department to further the work of foreign missions in the preaching of the Gospel to people in heathen countries.” These allegations were sufficient upon which to admit evidence of the performance of work and the in

The judgment is affirmed.

Plummer, J., and Pinch, P. J., concurred.

A petition for a rehearing of this cause was denied hy the District Court of Appeal on January 30, 1930, and 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 February 27, 1930.