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On October 26, 1988, Arthur, as president of Magna Carta,
transferred $49,000 of the $60,000 initial deposit to the trust.
On January 26, 1989, Magna Carta received $350,000 from the sale
of the building, and Arthur transferred $272,100 of the proceeds
to the trust. On that same date, $135,550 was transferred from
the trust to Edgar. From January 26 through February 2, 1989,
Arthur was transferred $136,550 from the trust. Arthur, as
president of Magna Carta, assigned the $568,064 note to the
trust. Edgar’s involvement with the trust and Magna Carta was
nominal and without knowledge of the legal nuances.
Before Victor’s death, the State of California brought an
action against Victor in which the State court held that Victor
used Magna Carta’s assets for his own benefit and that Magna
Carta was his alter ego. After Victor’s death and the sale of
the building, the California attorney general’s office filed a
complaint seeking a dissolution of Magna Carta and the
appointment of a receiver. Arthur and Edgar were named in the
complaint as defendants, both individually and as co-trustees of
the trust. On November 30, 1989, the Colusa County Superior
Court (the court) granted a summary adjudication, holding that
the transfer of at least the $272,100 by Arthur to the trust was
a nullity as a matter of law and that all transfers of money from
the sale of the building were property of Magna Carta. It was
argued that Victor had lent money to Magna Carta and that the
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