THESE parties appeared in reverse order in the trial court and are hereinafter referred to as there, or as the *Page 426 California company and Peter respectively. Other members of the Tarabino family are referred to as Michael (father of Peter), and John, Barney, and Joseph, brothers of Michael. The Tarabino Real Estate Company (of Colorado), hereinafter referred to as the Colorado company, and The Colorado Pacific Land Company (of California), hereinafter referred to as the Land company, are also incidentally concerned.
[1] Peter brought this action against the California company and Joseph for an accounting and judgment for such sum as found due him. He demanded a declaration of trust to that extent, the establishment of that judgment as a first lien on defendant's property, and orders restraining alienation of assets and for the production of all pertinent books and papers. Defendants denied indebtedness, joined in the request for an accounting, and sought judgment for such sum as thereby appeared due them. A referee was appointed who took testimony and reported approximately $20,000 due Peter. The defendant moved to amend its answer and that motion was denied. It filed objections to the report which were overruled and the report, in the main, approved. Joseph was dismissed as a defendant and decree entered for Peter awarding him the sum found due by the referee, plus over $12,000 interest, a total of approximately $32,000, together with 100 shares of the capital stock of the Colorado company. The decree further declared the trust prayed for and established the judgment as a first lien on the property, subject to certain exceptions here immaterial. To review that judgment defendant prosecutes this writ and assigns seven errors. These amount simply to assertions that the judgment is unsupported by the evidence and the trust and lien are unsupported by the law. If, as we conclude, the first is good the others require no consideration. An outline of facts, more extended than we could wish, is essential to an understanding of our conclusions.
About half a century ago Michael and John were engaged *Page 427 in the mercantile business at Engleville, Colorado, a mining camp in Las Animas county, near Trinidad. Peter was born February 6, 1900. His mother died soon after and his father died October 27, following, leaving Peter as sole heir to his estate of some $19,000. John was appointed his guardian and Barney succeeded to the property interests of Michael and took his place in the business, which was continued under the name of John Tarabino Company. The guardian, in effect, loaned Peter's money to the partnership, evidenced by a credit on its books and the payment of interest thereon. In May, 1911, the partners incorporated the Colorado company. Later they moved to California, where, with Joseph, they incorporated the Land Company. John died in 1918 and Barney succeeded him as guardian. He died in September, 1921, and was succeeded as guardian by Joseph whose appointment was merely for the purpose of closing the guardianship. Early in 1929 the Tarabinos incorporated the California company, plaintiff in error. It was organized to take over the other two corporations. There were but five stockholders, including Peter, and all were directors. They held but one meeting and that on January 15, 1929. The plan was for the California company to issue 3000 shares of stock, one to each director, 1498 to the Land company, and 1497 to the Colorado company. Each of these was then to exchange this California company stock with its own stockholders for its own stock and credits, and dissolve. All this clearly appears from the evidence and the minute books of both the Colorado and California companies. All the property of the Colorado company and the Land company was transferred to the California company in all these transactions Peter actively and affirmatively participated. He signed the articles of incorporation of the California company and prepared and signed the notice of dissolution of the Colorado company whose certificate recited that all its debts had been paid. As an officer of the latter he joined in the execution of *Page 428 all its transfers. In January, 1925, he participated in a meeting of the stockholders of the Colorado company at which its bylaws were amended and voted in favor thereof. The same month he participated and moved the ratification of all acts of directors for the preceding year. The following January he participated in a stockholders' meeting of the Colorado company and was elected a director and assistant secretary. The same month, in a directors' meeting, he was elected secretary-treasurer. In January, 1927, 1928, and 1929 he participated in stockholders' meetings of the Colorado company and signed the minutes as secretary. At the last mentioned meeting it was resolved to organize the California company and that the Colorado company and the Land company should be liquidated after discharging their liabilities and consolidated with the California company as above. Peter made that motion and signed those minutes. It was provided that if the stock and credits of the old companies exceeded $300,000 there was to be a proportionate reduction in the issued shares of the California company. The contemplated exchange never took place. Quite apparently because of a disagreement with Peter and a deficiency in shares to the extent of $15,000. Peter had acted as secretary of the Colorado company while Joseph, its then secretary, was in the army during the First World War, and he worked for that company in the summer of 1921. He reached his majority February 6, 1921, and when Joseph, his last guardian, filed his final report and was discharged October 22, 1922, that report showed a balance due in his hands of over $29,000 and was accompanied by Peter's receipt therefor. No cash was in fact held or passed. Credits in his favor on the books of the partnership were simply passed over to the books of the Colorado company on its organization and the balance, reported by his guardian Joseph and receipted for by him, was simply represented by those credits, as was well known to both. Thereupon the Colorado company paid *Page 429 interest as per agreement with Peter. All these partnerships and corporations were family organizations in which only the Tarabino family was interested.
Peter, after many harmonious years, asserted what appears to have been an unfounded claim to a credit of $15,000 over and above his credits as disclosed by the books of the Colorado company. This was the beginning of the discord and originally the principal bone of contention in this litigation. It was apparently based upon alleged misappropriations by John and Barney as guardians and it seems that insistence upon it by Peter was the one thing that prevented the consummation of the agreement for exchange of stock, etc., on the organization of the California Company. He says that in September 1921, Barney, on his deathbed, gave him some intimation that he was entitled to such a credit, hence in December, 1926, he entered it in his favor upon the books of the Colorado Company and from that time demanded "what was coming to him." Later Joseph discovered the entry and from time to time it was discussed. Joseph testifies that he conducted a continuous investigation with respect to it, finally learned that it was wholly unjustified, and January 2, 1930, wrote it off. That claim was disallowed by both the referee and the court and has now been abandoned by Peter. The record discloses nothing to support it. Because of that unsettled claim the stock of the California company has never been distributed as contemplated save one share to each stockholder (who was also a director) and the profits, which have not been large, have simply been distributed among the stockholders but not, technically, as dividends on stock. During all these years Peter has been credited with interest as per agreement and charged with his living expenses, education and other expenditures, including a purchase by him of $10,000 worth of stock of the Colorado company September 1, 1923. At times he drew certain sums, amounting in all to more than $1,000, from the Land company and these charges *Page 430 were transferred to the books of the Colorado company. His present claim now insisted upon simply amounts to this, i.e., that his guardians were trustees, that they used his money in their business, that this was a violation of their trust, that the stamp of that trust followed through from the partnership to the Colorado company and through it to the California company and should now be impressed upon all the property of the latter as a first lein, not only because of the conduct of his guardians, but because the facts upon which he relies were well known at all times to all other members of the family. The only reason urged by Peter why he should thus be absolved from responsibility for his own affairs and entitled to recover as for a violated trust, is that from the time of the death of Barney, Joseph was the dominating personality in all these transactions and that Peter was simply his "yes" man, uninformed and trustingly doing just as Joseph directed. That theory is unsupported by the record and cannot be upheld by the court.
There is no evidence here of Peter's mental incompetence, or of any fraud perpetrated upon him, or of any concealment or deception by his associates. These transactions were all open and aboveboard. He participated in all of them and since he was in a position to be perfectly familiar with all their details must be held to have had that knowledge. The Colorado company was at one time a very prosperous concern and Peter's money could not have been better invested. His income therefrom was apparently ample and his affairs well managed. When he bought stock in the Colorado company it is perfectly apparent that he considered the advantages of that purchase would exceed the profits derived from continuing to loan his money. When at the close of his guardianship he took credit on the company's books for the amount due him he was a mature man and must be held to have known exactly what he was doing and to have acted in the belief that such credit was better than cash. That closed the guardianship *Page 431 and definitely ended the trust. From that time on his claim was limited to interest on his money and dividends on his stock. When as an officer of the Colorado company he participated in the organization of the California company and became an officer thereof he was bound by the agreement as above outlined, and when he failed to get credit for his additional claim of $15,000 he was not thereby released from his engagements. His position in the California company is therefore that of a stockholder bound by its contracts and those of its predecessor, the Colorado company. On that basis he is entitled to his proportionate share of the stock of the California company based upon his stock in the Colorado company and his credits shown upon its books. This includes credit for interest on his money invested in the Colorado company by his consent, but that interest is not to be compounded where no specific contract therefor appears. If on this basis the stock issue of the California company is not sufficient to carry out its plans the pro rata distribution thereof can easily be proportionately reduced, or other method of equitable adjustment resorted to. Peter's claims to trust and lien thereby disappear. Those transactions, extending over twenty years of his manhood, in which he participated, from which he benefitted, and of which he had, or is necessarily presumed to have had, full and detailed knowledge, are his personal acts to the same extent as if he had bound himself thereto by express written contract.
[2] Where such a trust as here claimed is relied upon evidence thereof must not only be conclusive, the proof must go to each essential element of the case. Colorado Co.v. Harris, 97 Colo. 309, 49 P.2d 429. Here evidence of continuation of the trust after final settlement of the guardianship is not merely unconvincing, it is clearly to the contrary. Peter's receipt for cash with a definite understanding that it was represented by credits, is, in the absence of fraud or concealment, sufficient on this point. But added thereto is the further fact of his contract with *Page 432 the Colorado company for interest on such credits and the payment and receipt thereof with full knowledge and without protest for many years. In such soil no trust could flourish. Restatement of the Law — Trusts, vol. 1, p. 42, § 12g.
[3] Compound interest is allowable only when definitely agreed upon. Denver B. M. Co. v. McAllister,6 Colo. 261, 268.
The judgment is reversed and the cause remanded to the district court with directions to enter such judgment as shall be in conformity herewith and with power to take additional testimony, if such be necessary to that end.
MR. JUSTICE BAKKE and MR. JUSTICE BOCK concur.
MR. CHIEF JUSTICE YOUNG dissents.