Court Opinion

ID: 9548391
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:02:44.678137+00
Date Added: 2024-06-11T15:18:53.462009
License: Public Domain

Herd, J.,
dissenting: For easy reference and different emphasis, I will restate the facts. Michael Becker operates the Chanute Iron and Supply Company, a wholesale plumbing business. As such, he engaged in business with Randall Marsh and Dean Buman. Marsh operated the Marsh Construction Company, which built houses. Buman installed plumbing, heating and air conditioning in the houses Marsh built. Buman had been a customer of Becker’s for a number of years.
In 1979, Marsh and Buman went to the Allen County Bank and Trust, spoke with Ray Pershall, Bank president, and requested a loan to construct a speculative house in Iola. Mr. Pershall denied their request because of their lack of equity and inadequate financial statement.
Marsh and Buman then approached their friend and business associate, Michael Becker, for financial help. Becker agreed to borrow the money from the Allen County Bank and lend it to Marsh and Buman. Marsh and Buman were to take title to the property and give Becker a note secured by a first mortgage on the real estate. Becker was to receive 2% interest above the Bank interest rate. This agreement was reduced to writing by Becker’s attorney.
On March 19, 1979, the three entrepreneurs proceeded to the Allen County Bank and Trust where they again met with Ray Pershall. After examining Becker’s property statement and checking with his Chanute Bank, Pershall agreed, on behalf of the Bank, to loan Becker $60,000 on his financial statement. This amount was advanced by the Bank when requested by Becker *350and deposited in a checking account from which Marsh and Buman were authorized to draw. With these funds, Marsh and Buman purchased the Melody Acres lot, titled it in their names, and constructed a house upon it. Becker neither asked for nor received a note or mortgage from Marsh and Buman.
The house was completed in July of 1979. It did not sell well when first offered and was not sold by October 20, 1979, when the note was due. Becker renewed the note plus accrued interest at an increased interest rate of 14%. The note was again renewed on January 20, 1980, at the same 14% interest rate.
In the meantime, Ray Pershall retired from Allen County Bank and Trust and Bill James became Bank president. Mr. James loaned Marsh and Buman $96,160.97 to build another speculative house (Horde’s Addition) in Iola. The Bank’s first mortgage on the Horde’s Addition property secured only $65,000 of the cost. In addition, there were unpaid materialmen bills on this house. This became a problem loan for the Bank.
When the Melody Acres house was completed there were some unpaid bills for supplies. Marsh and Buman borrowed funds from the First National Bank of Chanute to discharge these obligations and gave that Bank a first mortgage on the property as security. Since neither Becker nor the Allen County Bank held a lien on the Melody Acres house, neither knew of this transaction until later.
The Allen County Bank brought suit against Marsh and Buman in Allen County on the note on the Horde’s Addition house on July 25, 1980. On May 13, 1980, Marsh and Buman, through Klotz Realty, finally entered into a contract for sale of the Melody Acres house with Richard Knewtson for the sum of $96,000; but to obtain this amount they had to accept a trade of lots in Gas, Kansas, valued at $23,500. The sale was closed at the Allen County Bank and Trust on August 15, 1980. Allen County Bank acted as agent for the sellers and the purchaser. The Bank received the funds from Knewtson and distributed them as directed. The Bank’s only claim to the proceeds of the sale of the Melody Acres house came through lis pendens on its lawsuit involving the Horde’s Addition house. Becker’s claim to the proceeds of the sale came through his contract with Marsh and Buman and an alleged oral contract with the Allen County Bank. The Bank distributed the sale proceeds to pay the liens on both *351the Melody Acres house and the Horde’s Addition house and credited $28,818.77 on Marsh and Buman’s note to the Bank. The Marsh and Buman note was the subject of the lawsuit on the Horde’s Addition property.
Mr. Becker brought this action against Allen County Bank alleging it orally agreed to apply the proceeds of the sale of the Melody Acres house on his note to the Bank. Absent such a contract, the Bank had no such obligation to Becker. Neither Becker nor the Bank had any interest in the Melody Acres house. Becker had a contractual right to a first mortgage on the house which he opted not to exercise. Had he done so, this lawsuit would not have occurred. Marsh and Buman had the legal right to handle the house as they chose. They illustrated that right by giving the First National Bank of Chanute a first mortgage on the Melody Acres house, the priority of which no one challenges.
The nexus of this case is the existence of an oral contract between the Allen County Bank and Trust and Michael Becker. There are three strong reasons why the existence of an oral contract should not have been submitted to the jury, each of which are questions of law for resolution by the court.
The first is if there was such an oral contract, it violated the Statute of Frauds and is void and unenforceable. K.S.A. 33-106 provides in pertinent part:
“No action shall be brought whereby to charge a party upon any special promise to answer for the debt, default or miscarriage of another person . . . unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith, or some other person thereunto by him or her lawfully authorized in writing.”
Marsh and Buman owed Becker $65,000; Becker owed Allen County Bank $65,000. The house belonged to Marsh and Buman. The Bank had no interest in the house and owed Becker nothing. The oral contract claimed by Becker places a burden on the Bank to pay the debt of Marsh and Buman to Becker from the proceeds of the sale of the Melody Acres house. That is an oral agreement to pay the debt of another and, as such, is void and unenforceable. The reason for the rule is to prevent claims such as Becker’s. The trial court erred in not so holding.
In addition to being void and unenforceable under the Statute of Frauds, the contract was also void for impossibility of performance. Marsh and Buman owned the Melody Acres house in *352which the Bank had no interest. Thus, the Bank had no control over the disposition of the house or the proceeds of its sale. This is illustrated by Marsh and Buman giving a mortgage on it to the First National Bank of Chanute.
If performance is impossible because of conditions existing at the time the contract was made, the agreement is void. See 17 Am. Jur. 2d, Contracts § 106:
“However improbable or absurd performance of a promise may be, the promise is binding if performance is possible; but if performance is impossible because of facts existing when the promise is made, the promise is void, at least where the impossibility is known to the parties, unless the risk of its impossibility is assumed, as where the parties know that performance may be impossible and base their contract upon this assumption. So too, where an obvious legal or physical impossibility of performance appears on the face of the contract, the contract is void.”
See also Restatement (Second) of Contracts § 266(1) (1979); Annot., 84 A.L.R.2d 12.
Thus, even if the Bank did agree to apply the proceeds of the Melody Acres house to Becker’s note with the Bank, the agreement was void.
Finally, the case should not have been submitted to the jury because there is no substantial, competent evidence that the Bank agreed to credit the proceeds of the future sale of the house against the Becker loan. Michael Becker, Randall Marsh, Dean Buman and Ray Pershall were present in the Allen County Bank and Trust on March 19, 1979, when the alleged oral contract was entered into. Becker testified Marsh and Buman agreed to pay their note to him out of the sale of the house. While it is true that Marsh and Buman agreed in writing to give Becker a first mortgage on the house, Becker neglected to obtain that mortgage. Becker further testified that Pershall agreed on behalf of the Bank to pay Becker’s note to the Bank from the sale of the Melody Acres house. Marsh, Buman and Pershall all deny such an agreement was made.
Becker’s testimony lacks substantiality for a number of reasons. First, there was no reason for such a promise since Marsh and Buman agreed to give Becker a first mortgage on the property. Second, such a promise from the Bank was impossible to perform as the Bank had no interest in the house. At the time the loan was made to Becker the house was a mere speculation. Marsh and Buman did not even have a lot upon which to *353construct a house at that time. Third, the Bank was receiving nothing for making such a promise since the loan was made to Becker solely upon his financial statement. To believe Becker’s testimony defies logic, rendering his evidence insubstantial.
It has long been the rule that when a verdict is attacked on the ground it is contrary to the evidence, it is not the function of an appellate court to weigh the evidence or pass on the credibility of the witnesses. If the evidence, with all reasonable inferences to be drawn therefrom, when considered in a light most favorable to the successful party below, will support the verdict this court should not intervene. Manley v. Wichita Business College, 237 Kan. 427, 432, 701 P.2d 893 (1985). The'duty of this court extends only to a search of the record for the purpose of determining whether there is any competent, substantial evidence to support the findings. Cantrell v. R. D. Werner Co., 226 Kan. 681, 684, 602 P.2d 1326 (1979). “Substantial evidence” is evidence which possesses both relevance and substance and which furnishes a substantial basis of fact from which the issues can reasonably be resolved. Stated in another way, “substantial evidence” is such legal and relevant evidence as a reasonable person might accept as being sufficient to support a conclusion. Wooderson v. Ortho Pharmaceutical Corp., 235 Kan. 387, 393, 681 P.2d 1038, cert. denied 105 S. Ct. 365 (1984).
If this definition of “substantial” is to have any meaning, then evidence must be sufficient in both amount and credibility to justify its submission to a jury. While Becker was a competent and credible witness, his testimony lacked quantitative substantiality in light of other evidence and circumstances shown by the record. The majority notes there was conflicting testimony as to whether the Bank agreed to credit the proceeds of the future sale of the home against the Becker loan. However, the majority then simply states “Becker’s testimony fully supports the existence of the agreement.” In reality, the majority has decided it need only search the record to determine whether any evidence supports the verdict. Such a determination renders the “substantial, competent evidence” standard meaningless and ineffective.
The jury system deserves the court’s respect and support. However, it works properly only when the trial is a cooperate effort between the court and jury. It is the court’s duty to remove a case from a jury’s consideration where no substantial compe*354tent evidence exists to support the verdict. Here, not only was there no substantial competent evidence to support the plaintiff s allegations, but if such an oral contract existed it was void for impossibility of performance and unenforceable under the Statute of Frauds. The trial court erred in failing to direct a verdict for the defendant, Allen County Bank and Trust. I would reverse.