Case Title: SCHLESINGER v. WOODCOCK

Citation: 

Docket Number: 00-268

State: wyoming

Court: Wyoming Supreme Court

Date: 2001-12-07T00:00:00Z

Document:
SCHLESINGER v. WOODCOCK2001 WY 12035 P.3d 1232Case Number: 00-268Decided: 12/07/2001

OCTOBER TERM, A.D. 2001

                                                                                                
     

MARY 
BETH SCHLESINGER, 

Appellant(Defendant),

v.

BETTY 
JANE WOODCOCK, 

Appellee(Plaintiff).

The 
Honorable David B. Park, Judge

Representing 
Appellant:

            
Stephen R. Winship of Winship & Winship, P.C., Casper, Wyoming  

 Representing 
Appellee:

            
Kenneth R. Marken, Casper, Wyoming  

  

Before 
LEHMAN, C.J., and GOLDEN, HILL, KITE, and VOIGT, JJ.

  
            
KITE, Justice.

 [¶1]      Appellant Mary 
Beth Schlesinger and her company, Custom Syndicated Research, Incorporated 
(CSR), obtained numerous loans from private individuals; some were documented 
with promissory notes, and some were not.  
All the notes and the verbal negotiations described the same terms.  Appellee Betty Jane Woodcock, one of the 
lenders with both documented and undocumented loans, sought to collect claiming 
the parties' course of dealing established the loan terms for the undocumented 
loans.  After default, Ms. 
Schlesinger obtained Ms. Woodcock's signature on a modified loan agreement with 
much more favorable terms for the borrower.  The trial court granted summary judgment 
on the documented loans and held the modified loan agreement void for lack of 
consideration.  After a bench trial, 
the trial court entered judgment for Ms. Woodcock on the remaining loans finding 
the oral contract loans included the same terms as the written promissory 
notes.  Ms. Schlesinger appealed the 
judgment as it pertained to the undocumented loans.  We affirm.

[¶2]      Ms. Schlesinger 
presents these issues: 

1.  After undocumented 
loans were made, whether a written agreement that established the interest rates 
and due dates of said loans and provided the lender with a reinvestment option 
was supported by any consideration.

2.  After 
determining that a written agreement was void, did the District Court err in 
relying upon that agreement to support its judgment that specified the terms for 
the underlying oral agreements[?]

3.  When 
the only witness to support the Plaintiff's theory regarding the parties' 
"course of conduct" was not credible, did the Court err in granting judgment in 
favor of Plaintiff[?]

 
4.  Whether 
the District Court erred when it awarded Plaintiff her attorney's fees incurred 
in relation to her unsuccessful attempt to establish her allegations of fraud 
and conspiracy.

Ms. 
Woodcock rephrases the issues in the following manner:

1.  Did 
the trial court correctly hold Appellant Mary Beth Schlesinger liable to . . . 
Appellee Betty Jane Woodcock for the principal, interest, late penalty fees and 
collection costs, including attorney's fees, for five unpaid loans which 
Appellee made to Appellant and her company?

A.  Did 
the trial court commit reversible error in determining that an antecedent 
document entitled "Loan Agreement" was unenforceable for lack of consideration, 
and thus, did not relieve the Appellant-Defendant of her liability for the five 
unpaid loans?

B.  Did 
the trial court commit reversible error in finding the five unpaid loans to be 
enforceable by Appellee-Plaintiff against Appellant-Defendant, even in the 
absence of supporting promissory notes?

C.  Did 
the trial court abuse its discretion in awarding Appellee-Plaintiff her 
reasonable attorney's fees and costs of collection?

[¶3]      In 1997, CSR 
began experiencing financial difficulties and needed funds to make its 
payroll.  Ms. Schlesinger, the sole 
shareholder and president, approached her friend, Ted Dixon, a financial planner 
and investment advisor, seeking his assistance in obtaining the necessary 
funds.  Mr. Dixon agreed to help and 
approached three of his clients, as well as his parents, with the possibility of 
them providing loans to CSR as investments.  

[¶4]      From the outset, 
Mr. Dixon made it clear to Ms. Schlesinger that, 
in order to justify advising his clients to take money out of their 
current investments, the terms of any loans would necessarily require a high 
rate of return and strong collateralization.  He specifically informed Ms. 
Schlesinger, based on his experience with similar situations, the interest rate 
would have to be twenty-five percent and the loans short term.  In those initial discussions, Mr. Dixon 
also informed Ms. Schlesinger that, on behalf of his clients, he would require 
her personal liability for repayment of the loans in addition to CSR.  He explained this requirement was 
necessary to provide his clients maximum security.  A total of fourteen loans were entered 
into between Mr. Dixon's clients, Ms. Schlesinger, and CSR between April 1997 
and April 1998.  All the loans from 
Mr. Dixon's clients to CSR and Ms. Schlesinger documented by promissory notes 
contained terms providing twenty-five percent 
interest, joint and several liability of Ms. Schlesinger and CSR, and attorney's 
fees.  Some of the loans were 
documented in promissory notes, and others were not.  One such loan made by Ms. Woodcock, a 
person in her seventies, on January 12, 1998, was documented by a receipt which 
included the notation "Loan to CSR Inc. Standard Terms."  At no time did Ms. Schlesinger question 
or object to the terms as described by Mr. Dixon or as set out in the 
documentation.  The following is a 
complete list of the undisputed loans from Ms. Woodcock:

            
4/11/97                       
$20,000                   
Executed note                                   
Paid

            
4/17/97                       
$50,000                   
Executed note                                   
Paid

            
11/24/97                     
$25,000          
            
No note                                   
Unpaid

            
12/15/97                     
$15,000                  
Executed note                                   
Unpaid

            
1/12/98                       
$25,000                      
Receipt                                   
Unpaid

            
3/18/98                       
$15,000                      
No note                                   
Unpaid

            
4/16/98                       
  $9,000                      
No note                                   
Unpaid

[¶5]      During 1998, Mr. 
Dixon began experiencing serious personal problems which impaired his ability to 
conduct his business.  Ms. 
Schlesinger had difficulty obtaining responses to inquiries and documentation 
for loans she was receiving through Mr. Dixon.  The record reflects that several loans 
Mr. Dixon arranged between Ms. Woodcock and Ms. Schlesinger in late 1997 and 
1998 were not accompanied by written promissory notes.  However, Ms. Schlesinger provided no 
evidence of any discussion prior to the loans relating to a change of the 
standard terms, and Ms. Woodcock relied upon those terms in making the 
loans.  Mr. Dixon admitted that it 
was his fault promissory notes were not found to memorialize all the loans but 
he "couldn't imagine approving a loan without those terms."  No negotiations ever occurred between 
Ms. Schlesinger and Ms. Woodcock directly, and Ms. Woodcock relied upon Mr. 
Dixon to make good investments on her behalf.  

[¶6]      Ms. Schlesinger 
testified that Mr. Dixon set forth the loan terms on a "take it or leave it" 
basis and she agreed to them, including joint and several liability.  She had no explanation or evidence to 
suggest what the terms of the undocumented loans would have been if the 
"standard terms" were not applied.  At about the same time frame as the last 
undocumented Woodcock loans were made in March and April of 1998, a loan was 
made by another of Mr. Dixon's clients which was documented by a promissory note 
with the same standard termstwenty-five percent interest, joint and several 
liability, and attorney's fees.  

[¶7]      Approximately 
five months after Ms. Woodcock made the last loan to Ms. Schlesinger and CSR, 
Ms. Schlesinger's father presented a modified loan agreement to Ms. Woodcock and 
informed her that, because several of her loans were not documented by 
promissory notes, this modified loan agreement would provide her greater 
security.  The modified loan 
agreement purported to supersede all prior agreements relating to the loans, 
reduced the interest rate to ten percent, and, in effect, eliminated the joint 
and several liability.  By its own 
terms, the modified loan agreement supported Ms. Woodcock's contention that all 
the previous loans were subject to the same "standard terms."  The section discussing the computation 
of interest due, drafted by Ms. Schlesinger's representatives, referred to the 
verbal terms negotiated by Mr. Dixon including the twenty-five percent interest 
rate.  

[¶8]      The modified loan 
agreement lowered the interest rate, eliminated the protection of joint and 
several liability, and extended the term of the loans.  It provided no additional protection of 
Ms. Woodcock's legal right to repayment of the previous loans.  Ms. Woodcock signed the loan agreement 
without Mr. Dixon's knowledge.  A 
few weeks subsequent to the agreement being signed, CSR filed for 
bankruptcy.

  

[¶9]      Ms. Woodcock 
filed suit in an effort to collect on the loans and also made allegations of 
fraud and conspiracy.  Both parties 
sought summary judgment on the modified loan agreement.  The trial court granted Ms. Woodcock's 
summary judgment motion concluding the modified loan agreement lacked 
consideration and was void.

[¶10]   In addition, the trial court 
granted Ms. Woodcock summary judgment on the December 15, 1997, promissory note 
executed by Ms. Schlesinger and on certain of the standard loan terms applicable 
to the remaining loans including the twenty-five percent interest rate and the 
thirty-five-day repayment deadline calculated 
from the date of the loans.  
The trial court also granted Ms. Schlesinger summary judgment on the 
fraud and civil conspiracy claims.

[¶11]   Following a trial to the court on 
the remaining issues, the court found a course of dealing existed between the 
parties which proved each of the oral contracts for loans included:  joint and several liability; twenty-five 
percent interest per annum on any unpaid balance; short term due dates; late 
charges of one percent on the principal; and the obligation of the borrowers, 
including Ms. Schlesinger, to pay all reasonable attorney's fees and costs of 
collection.  Judgment was awarded 
for $89,000 in principal, $52,995.89 in interest through June 2, 2000, $890 in 
late fees, $11,140 in attorney's fees and costs of collection, and $996.20 in 
court costs.  Ms. Schlesinger 
appealed both the summary judgment order and the final 
judgment.

[¶12]   It is well recognized that summary 
judgment is proper only when there are no genuine issues of material fact and 
the prevailing party is entitled to judgment as a matter of law.  Hovendick v. Ruby, 10 P.3d 1119, 
1122 (Wyo. 2000); Mountain Cement Company v. Johnson, 884 P.2d 30, 32 
(Wyo. 1994).  This court reviews a 
summary judgment in the same light as the district court, utilizing the same 
materials and following the same standards.  Hovendick, 10 P.3d  at 1122.  The record is examined from the vantage 
point most favorable to the party opposing the motion, and that party is given 
the benefit of all favorable inferences which may fairly be drawn from the 
record.  Id.; Four Nines Gold, 
Inc. v. 71 Construction, Inc., 809 P.2d 236, 238 (Wyo. 1991).  The propriety of granting a summary 
judgment motion depends upon the correctness of the court's dual findings that 
there is no genuine issue as to any material fact and the prevailing party is 
entitled to a judgment as a matter of law.  
Bender v. Phillips, 8 P.3d 1074, 1077 (Wyo. 2000).  Questions of law are reviewed de 
novo without affording deference to the district court's decision.  Boley v. Greenough, 2001 WY 47, 
¶10, 22 P.3d 854, ¶10 (Wyo. 2001).

[¶13]   "When a trial court in a bench 
trial makes express findings of fact and conclusions of law, we review the 
factual determinations under a clearly erroneous standard and the legal 
conclusions de novo."  
Rennard v. Vollmar, 977 P.2d 1277, 1279 (Wyo. 1999); see also 
Cross v. 
Berg Lumber Company, 7 P.3d 922, 928 (Wyo. 2000); Fremont 
Homes, Inc. v. Elmer, 974 P.2d 952, 958 (Wyo. 1999); Hopper v. All Pet Animal Clinic, Inc., 861 P.2d 531, 538 (Wyo. 1993).  This 
court does not weigh the evidence de novo; therefore, findings may not be 
set aside because we would have reached a different result.  Cross, 7 P.3d  at 928; Shores 
v. Lindsey, 591 P.2d 895, 899 (Wyo. 1979).  Moreover, the appellant bears the burden 
of persuading the appellate court that the finding is erroneous.  Cross, 7 P.3d  at 928; 9 Charles 
Alan Wright & Arthur R. Miller, Federal Practice and Procedure:  Civil 2d § 2585 
(1995).

[¶14]   The fundamental question concerning 
the validity of the modified loan agreement is whether the agreement is 
supported by any consideration.  Did 
Ms. Woodcock receive anything of value in exchange for her supposed agreement 
five months after the last loan to substantially reduce the interest rate, 
eliminate joint and several liability, and alter other terms of the loans?  Without valid consideration, the 
agreement is invalid.  Prudential 
Preferred Properties v. J and J Ventures, Inc., 859 P.2d 1267, 1272 (Wyo. 
1993); see also Brodie v. General Chemical Corporation, 934 P.2d 1263, 
1268 (Wyo. 1997); Idaho Migrant Council, Inc. v. Warila, 890 P.2d 39, 41 
(Wyo. 1995).  Consideration may take 
a variety of forms including the performance of some act, a forbearance, or the 
creation, modification, or destruction of a legal relationship.  Prudential Preferred Properties, 
859 P.2d  at 1272; Moorcroft State Bank v. Morel, 701 P.2d 1159, 
1161-62 (Wyo. 1985).  The problem 
Ms. Schlesinger's argument faces is, the performance or promise offered as 
consideration cannot be for an obligation the promisor is already legally 
required to perform.

It is 
well recognized that the performance of a duty imposed by law is insufficient 
consideration to support a contract.  
See, e.g., Hale v. Brewster, 81 N.M. 342, 467 P.2d 8, 11 
(1970) (court-appointed attorney had duty to accept payment from court for 
representation as sole compensation; if client's note was given to attorney as 
fee for services, attorney was already bound to perform and client had a valid 
defense to action by attorney on the note); Gragg v. James, 452 P.2d 579, 
587 (Okla.1969) (oral modification to contract relieving defendant of 
responsibility must be supported by additional consideration to be enforceable); 
Walden v. Backus, 81 Nev. 634, 408 P.2d 712, 714 (1965) (buyer's 
relinquishment of premises insufficient to support accord where buyer was 
already bound under sale agreement to return premises); Restatement (Second) of 
Contracts § 73 (1981).
 

Prows v. 
State, 822 P.2d 764, 768 (Utah 1991).  Payment 
of a debt which is due and undisputed does not constitute consideration for a 
promise.  17A Am. Jur. 2d 
Contracts § 145 (1991).  
Likewise, a mere promise to pay a debt for which the promisor is already 
legally bound does not constitute a consideration sufficient to support a new 
contract.  Id; see also Przylepa 
v. Przylepa, 603 N.E.2d 1083, 1085 (Ohio Ct. App. 1991); Shannon v. 
Universal Mortgage & Discount Co., 157 N.E. 478, 481 (Ohio 
1927).  Specifically, the 
promise to pay a debt already due is not sufficient consideration for a 
creditor's promise to forbear the time of payment.  O'Brien v. General Motors Acceptance 
Corporation, 362 P.2d 455, 458 (Wyo. 1961). 

[¶15]   Ms. Schlesinger has argued the 
modified loan agreement provided protection to assure payment of the outstanding 
loans over and above the protection Ms. Woodcock already had under the notes and 
oral agreements.  However, if the 
terms of the oral agreements were known through the parties' course of conduct, 
no further protection was provided by the modified loan agreement.  Certainly, the modified loan agreement 
provided no security or collateral which might have been adequate 
consideration.  At bottom, the 
validity of the modified loan agreement and the enforceability of the oral 
agreements are mutually exclusive.  
If the oral agreements are enforceable, the loan agreement offers Ms. 
Woodcock nothing but substantially less attractive loan terms.  If the oral agreements are not 
enforceable, the modified loan agreement is of value to Ms. Woodcock, or at 
least it was prior to CSR's filing for bankruptcy.

[¶16]   We agree with the trial court that 
the terms of the oral loan agreements are knowable and certain given the 
parties' clear course of conduct over a year's time with fourteen different 
loans and four different lenders.  
After hearing all the evidence, the trial court made factual findings 
that the terms of Ms. Woodcock's agreement to loan money to Ms. Schlesinger and 
CSR included twenty-five percent interest, a term of forty days at most, joint 
and several liability, a one percent late fee, and payment by the debtor of all 
reasonable attorney's fees and costs of collection.  We give great deference to the trier of 
fact and find adequate evidence in the record to support these findings.  Raymond v. Raymond, 956 P.2d 329, 
332 (Wyo. 1998); Brown v. State, 944 P.2d 1168, 1170 (Wyo. 
1997).

[¶17]   Given those facts, Ms. Woodcock had 
an enforceable contract, and the post hoc  modified loan agreement provided her 
with no greater security than that to which she was already entitled by 
law.  To suggest, as Ms. Schlesinger 
does, that, because Ms. Woodcock, an elderly person not represented by counsel 
in the review of the loan agreement, was "thankful" to see the agreement somehow 
provided consideration for giving up a bargained for twenty-five percent 
interest rate, joint and several liability, and costs of collection is 
inherently suspect.  As noted in the 
comment to Restatement (Second) of Contracts:

A claim 
that the performance of a legal duty furnished consideration for a promise often 
raises a suspicion that the transaction was gratuitous or mistaken or 
unconscionable. . . . Because of the likelihood that the promise 
was obtained by an express or implied threat to withhold performance of a legal 
duty, the promise does not have the presumptive social utility normally found in 
a bargain.

Restatement 
(Second) of Contracts § 73 cmt. a at 179-80 (1981).  Ms. Schlesinger's contention the 
modified loan agreement benefited Ms. Woodcock by the mere fact that it 
documented the previous loans misses the mark.  It appears much more likely Ms. 
Schlesinger, in an attempt to avoid the admittedly onerous loan terms, took 
advantage of Mr. Dixon's impairment which left Ms. Woodcock vulnerable to the 
suggestion the modified loan agreement was in her interest.  Quite the opposite is true; the 
agreement removed the only protection Ms. Woodcock had for repayment of the 
loansMs. Schlesinger's personal liability.

[¶18]   Ms. Schlesinger further argues to 
this court that, even if the modified loan agreement lacked consideration, 
pursuant to the Uniform Commercial Code provisions Wyo. Stat. Ann. §§ 
34.1-1-1071 and 34.1-2-209(a)2 (LexisNexis 2001), it is not 
invalid.  These UCC contentions were 
never presented to the trial court.  
Excepting appeals involving issues of jurisdiction or fundamental rights, 
we customarily will not consider issues raised for the first time on 
appeal.  Robinson v. 
PacifiCorp, 10 P.3d 1133, 1136 (Wyo. 2000); WW Enterprises, Inc. v. City 
of Cheyenne, 956 P.2d 353, 356 (Wyo. 1998); see also Rowan v. 
Rowan, 786 P.2d 886, 889 (Wyo. 1990); Dennis v. Dennis, 675 P.2d 265, 
266 (Wyo. 1984).  On this well 
established principle, we decline to address these newly presented UCC 
contentions.

[¶19]   Ms. Schlesinger also complains, 
without providing any supporting authority, that, if the loan agreement is 
invalid, the court erred when it considered language in the agreement evidencing 
her knowledge and agreement that the loans carried a twenty-five percent 
interest rate.  Simply because the 
agreement was invalid and not binding on Ms. Woodcock does not require the court 
to ignore the facts and circumstances surrounding the drafting of the agreement 
as they pertain to other issues in the case.  Generally, relevant evidence is 
admissible.  W.R.E. 402.  "Relevant evidence' means evidence 
having any tendency to make the existence of any fact that is of consequence to 
the determination of the action more probable or less probable than it would be 
without the evidence."  W.R.E. 
401.  "Admission of 
evidence . . . is within the sound discretion of the trial 
court; we will not disturb evidentiary rulings unless the appellant demonstrates 
a clear abuse of discretion."  
Young v. HAC, LLC, 2001 WY 50, ¶6, 24 P.3d 1142, ¶6 (Wyo. 2001); 
see also Brown v. Michael Pryor, M.D., P.C., 954 P.2d 1349, 1350 (Wyo. 
1998).  Ms. Schlesinger's bald 
assertion does not establish abuse of discretion, and we will not disturb the 
trial court's determination on this basis.

[¶20]   Ms. Schlesinger has argued that Mr. 
Dixon's impairment and purported memory deficits undermined his credibility and 
the trial court erred in relying on his testimony.  This issue was fully explored at trial, 
and we give deference to the judge's opportunity to assess the credibility of 
the witnesses.  Hammond v. 
Hammond, 14 P.3d 199, 203 (Wyo. 2000).  
After careful review of the record, we cannot conclude that the trial 
court's findings were clearly erroneous. 

[¶21]   

Wyoming 
subscribes to the American rule regarding recovery of attorneys' fees.  Under the American rule, each party is 
generally responsible for his own attorneys' fees.  A prevailing party may, however, be 
reimbursed for his attorneys' fees when express statutory or contractual 
authorization exists for such an award.

 Cline v. Rocky Mountain, Inc., 998 P.2d 946, 949 (Wyo. 2000) (citations omitted).  In this case, as determined by the trial 
court, Ms. Woodcock clearly prevailed, and the standard contract terms provided 
for the award of the attorney's fees and costs incurred to collect the 
underlying debt should such become necessary, as it obviously did.  To determine the reasonableness of the 
attorney's fees award, Wyoming employs the two-factor federal lodestar 
test.  Cline, 998 P.2d  at 
951; Johnston v. Stephenson, 938 P.2d 861, 862 (Wyo. 1997); see 
also Wyo. Stat. Ann. § 1-14-126(b) (LexisNexis 2001).  These factors are:  "(1) whether the fee charged represents 
the product of reasonable hours times a reasonable rate; and (2) whether other 
factors of discretionary application should be considered to adjust the fee 
either upward or downward."  
Johnston, 938 P.2d at 862-63; see also Cline, 998 P.2d  at 951.  It follows therefrom 
that the trial court's determination concerning attorney's fees is reviewed 
under an abuse of discretion standard.  
Cowardin v. Finnerty, 994 P.2d 335, 337 (Wyo. 1999);  Johnston, 938 P.2d  at 862.  

[¶22]   Ms. Woodcock provided detailed time 
records and her attorney's affidavit to support the reasonableness of the fees 
and costs claimed.  By decision 
letter dated June 14, 2000, the trial court gave careful consideration to the 
evidence supporting the request for attorney's fees and Ms. Schlesinger's 
objections to the award.  From the 
language of the letter, it is clear the lodestar factors were considered 
although not specifically identified as such. This record adequately supports 
the court's award, and we can find no abuse of discretion.  

[¶23]   CSR and Ms. Schlesinger entered 
into seven short term, high risk loan agreements with Ms. Woodcock as negotiated 
and arranged by Mr. Dixon.  Four 
loans were documented by promissory notes or a receipt, and the other three 
loans were undocumented.  We 
conclude the trial court properly determined that the course of the parties' 
dealings established the terms of the undocumented loans.  We further conclude the modified loan 
agreement that substantially altered the terms of the original agreements 
without providing anything of value to Ms. Woodcock was invalid for lack of 
consideration.  The trial court's 
determination on the merits was not clearly erroneous, and its discretionary 
award of attorney's fees and costs was supported by the 
record.

[¶24]   Affirmed.

FOOTNOTES

  1Section 
34.1-1-107 provides:  "Any claim or 
right arising out of an alleged breach can be discharged in whole or in part 
without consideration by a written waiver or renunciation signed and delivered 
by the aggrieved party."

2  Section 34.1-2-209(a) 
provides:  "An agreement modifying a 
contract within this article needs no consideration to be 
binding."