Court Opinion

ID: 9552303
Source: CourtListenerOpinion
Date Created: 2023-08-07 19:08:23.641999+00
Date Added: 2024-06-11T15:26:06.926394
License: Public Domain

JACKSON, Vice Chief Justice
(concurring specially).
In view of the fact that this case is to be retried I believe it may be helpful if we give consideration to other contentions made by appellant, Hart Industrial Supply Company, as well as other facts apparent from the record.
At Pre-Trial conference plaintiff, Hart Industrial, moved the court to require defendants to elect either to affirm the note sued upon in this case, admit liability therefor, and sue for damages on their counter claim or set-off, or to require defendants to deny the note on the basis of failure of consideration. Defendants elected to deny liability on the note for “failure of consideration.” Thus it is apparent that defendants limited themselves in the trial of this case to the sole questions of whether there was a total failure of consideration or a partial failure of consideration. It is settled in Oklahoma that a partial failure of consideration may be shown under an answer which pleads a total failure of consideration. Roberts et al. v. Boydston, 186 Okl. 336, 97 P.2d 898.
Hart Industrial complains of the court’s instructions, contending that these instructions embodied the defense of fraud in the inducement to sign the $3,122.88 note, which defense was not pleaded. For clarity instructions numbered 4, 5, and 6 will be quoted as follows:
“Instruction No. 4. The Defendant herein, as grounds for their claim that they do not owe Plaintiff the note in question, say that at the time they signed the note herein sued upon, they were told by agents of the Plaintiff corporation that if they did sign the note, the Plaintiff would send a representative to Lawton to assist the Defendants in properly setting up and installing the equipment theretofore sold so that Defendants would be satisfied with its operation and that the Plaintiff further assured the Defendants that they would help them get business so that they could make the equipment pay off; and Defendants further say that Plaintiff failed to comply with either of these promises and representations. It will be for the jury to say whether or not such representations were made by the plaintiff to induce the Defendant to sign the note in question; and if the jury find that Plaintiff’s agents did make such representations and promises or either of them and failed to comply with said promises, and if the jury find that the Defendants would not have signed the note in question except for the making of said promises, then your verdict should be for the Defendants and against the plaintiff. Otherwise your verdict should be for the Plaintiff and against the Defendants.
“Instruction No. 5. You are instructed that the consideration of the Plaintiff paying the three installments on the big note for which the defendants were primarily liable is adequate consideration for the execution of the note in question; and this fact standing alone is sufficient to justify a verdict at your hands in favor of' plaintiff and against the Defendants; but nonetheless the Plaintiff’s right to recover on the note might be defended notwithstanding the adequate consideration therefor, if the jury find that Plaintiff made promises and representations to Defendants to induce them to sign the note which they would not otherwise have done, and further that Plaintiff failed to comply with such promises.
*98“Instruction No. 6. You are instructed that a partial failure of performance is grounds for rescission when such failure defeats the object of the contract or when it concerns a matter of such importance that the contract would not have been made if default in that particular had been expected or contemplated.”
It is apparent that the foregoing instructions do not use the words “fraud” or “fraud in the inducement”. However, it is quite clear that these instructions authorize the jury to rescind the contract if the jury should find that a partial failure of performance by plaintiff was of such importance that the note would not have been signed.
Defendants did not plead fraud in the inducement, but if it had been pleaded by defendants I am of the view that it would have been error to have given the instructions under the facts in this case.
15 O.S.1961, § 233, authorizes a party to a contract to rescind if his consent to the contract is obtained through fraud of the other contracting party; and under sub-paragraph 2 of Sec. 233, a contracting party is authorized to rescind “if through the fault of the party as to whom he rescinds, the consideration for his obligations fails in whole or in part.” However, Section 235 (of Title 15) provides that a party rescinding must exercise reasonable diligence to comply with the following rules:
“1. He must rescind promptly, upon discovering the facts which entitle him to rescind, if he is free from duress, menace, undue influence, or disability, and is aware of his right to rescind; and,
“2. He must restore to the other party everything of value which he has received from him under the contract; or must offer to restore the same, upon condition that such party shall do likewise, unless the latter is unable, or positively refuses to do so.”
From the record in this case it is apparent that defendants have not restored to the plaintiff the $3,122.88 that plaintiff paid to the Oklahoma City bank to apply on defendants’ “big note” at that bank, or offered to do so. Therefore rescission was not available as a defense in this case.
Since the consideration to be paid by plaintiff to defendants did not wholly fail (plaintiff having paid $3,122.88 of the agreed consideration) it is apparent that the legitimate defense in this case is “partial failure of consideration.” However, in my opinion this does not mean that plaintiff must necessarily have judgment for its partial performance, or partial consideration which it paid to the Oklahoma City bank on defendants’ behalf.
In 48 O.S.1961, § 75, it is provided in part that a partial failure of consideration is a defense “pro tanto”. In Black’s Law Dictionary, 4th Edition, Pro Tanto is defined as “For so much; for as much as may be; as far as it goes”.
I have found no case, and none has been cited, which holds that a partial failure of consideration may constitute a complete defense against a suit upon a note. Hart Industrial invites our attention to Roberts v. Boydston, 186 Okl. 336, 97 P.2d 898; Dickson v. Joy, 188 Okl. 597, 112 P.2d 355; and Boydston v. Roberts, 191 Okl. 227, 127 P.2d 808. These cases seem to hold generally that where the consideration for the note consists of two separate things and the payee fails to perform one of those things, that the jury should ascertain the value of that portion of the consideration or thing which failed and then to subtract that amount from the amount set forth in the note. In McMillan v. Gardner, 88 Kan. 279, 128 P. 391, the amount due on the note was $2,450.00. The value of that portion of the consideration which failed was $2,250.00. The court held that the holder of the note might recover for that part as to which the consideration had not failed, which I assume was the difference between $2,250.00 and $2,450.00, or $200.00.
*99In the instant case defendants claim, m effect, that on March 18, 1960, in settling their prior controversy with plaintiff they agreed that they would execute a note in favor of plaintiff for $3,122.88 if plaintiff would pay the first three delinquent installments ($3,122.88) on the “big note” owed by defendants to an Oklahoma City bank and if plaintiff would properly install the equipment located in defendants’ plant at Lawton and would help defendants get additional customers or business.
It is admitted that plaintiff paid the first three delinquent installments ($3,122.88) on defendants’ “big note” at the bank but it is contended that plaintiff failed to perform the other services agreed upon. Under these circumstances, and if defendants again try their case upon the defense of “partial failure of consideration”, it seems to me that a determination of the monetary value of the contemplated services not performed by plaintiff, if any, should be ascertained by the jury and the jury instructed to subtract that amount from the amount to which plaintiff is entitled, and to give plaintiff judgment for the difference, if any. This procedure could result in a “partial failure of consideration” constituting a complete defense to the note. This conclusion is reached because of the fact that defendants admittedly owe plaintiff $3,122.88, and possibly some interest and attorney fees. The jury may find from the evidence that the plaintiff is indebted to the defendants for an equivalent or greater sum of money than is owed by defendants to the plaintiff. In these circumstances the consideration which failed would constitute a complete set-off against the amount owed by defendants, and plaintiff should take nothing. Admittedly there are old decisions from older states which do not share this view, 10 C.J.S. Bills and Notes, § 523, but they appear to be based upon statutes not similar to our own, 48 O.S.1961, § 75, supra, or under common law. I believe the reasoning set forth herein is consistent with the Kansas case, supra, and the Oklahoma cases relied upon by Hart Industrial, and logically follows from the conclusions therein reached.
I am authorized to state that DAVISON and IRWIN, JJ., concur in the views herein expressed