## Facts

- Merced Stone Co. (Merced) owed a substantial monetary debt to Thomas Prather (Thomas).
- Thomas’s brother, Samuel Prather (Samuel), was in Merced’s leadership and held a seat on its board of directors.
- By virtue of that position, Samuel had access to Merced’s books and financial statements.
- As Thomas was about to die, Samuel claimed Thomas made a verbal inter vivos gift to Samuel of the debt Merced owed Thomas.
- Thomas knew Samuel’s corporate position gave Samuel the ability to cause Merced’s financial statements to show an obligation to Samuel rather than to Thomas.
- The record did not show any discussion between Thomas and Samuel about changing Merced’s books to reflect a transfer of the debt.
- There was no evidence—other than Samuel’s testimony—that Thomas delivered anything to Samuel evidencing a transfer of the debt (no written assignment, instrument, or other token of ownership).
- After Thomas died, Samuel took over Thomas’s interest in Merced.
- Adams (Adams), executor of Thomas’s estate, sued Merced in California state court to recover on the debt owed to Thomas.
- The trial court entered judgment for Merced, accepting the defense that the debt had been gifted to Samuel, and Adams appealed.

## Issues

1. Is a verbal inter vivos gift of a debt enforceable when there is no delivery of the debt or of any written assignment or other instrument transferring the right to the donee?

## Decision

- The Supreme Court of California reversed the judgment for Merced.
- The court held the alleged gift of the debt was not completed because there was no actual or symbolic delivery placing the right to the debt under Samuel’s control.
- The debt remained an asset of Thomas’s estate subject to collection by the executor.

## Legal Principles

- A valid inter vivos gift requires (1) donative intent and (2) delivery sufficient to complete the transfer, followed by acceptance (usually presumed when beneficial).
- Where the subject of the gift is capable of delivery, a mere oral declaration of gift is not enough; some objective act must evidence a completed transfer.
- For an intangible right such as a debt (a chose in action), delivery ordinarily requires a written assignment, transfer document, or delivery of an instrument that represents or controls the right.
- A donee’s ability to effect a bookkeeping change because of a corporate position does not substitute for delivery by the donor; the transfer must be accomplished by an act traceable to the donor.
- The delivery requirement serves to reduce fraud and mistake, especially when the alleged donor is deceased and the claim depends largely on the alleged donee’s testimony.

## Conclusion

Because Thomas allegedly made only an oral statement and took no objective step—such as executing or delivering an assignment or other instrument—to transfer the debt owed by Merced, the purported gift to Samuel was incomplete and ineffective; the California Supreme Court therefore reversed the judgment for Merced and treated the debt as property of Thomas’s estate recoverable by the executor.


Adams v. Merced Stone Co., 178 P. 498 (1917)