Court Opinion

ID: 9629484
Source: CourtListenerOpinion
Date Created: 2023-08-22 09:43:31.825038+00
Date Added: 2024-06-11T18:07:19.704214
License: Public Domain

SUTIN, Judge (concurring in part and dissenting in part). Plaintiff sued four individuals d/b/a Old Town Development Co. and Old Town Development Co., a limited partnership. The claim sought recovery in two of three counts on two promissory notes, one for $36,910.76, and the second for $2,553.94. The two notes were executed as follows: Old Town Development Co. By Freeway Old Town Limited, General Partner, By Cyril Wolfson, President Lobo Hijo Corporation, its General Partner. Old Town Development Company, Ltd. is a limited partnership. The limited partners are four individuals, one of whom appeared to be their representative during the construction of a hotel. He cooperated with Cyril Wolfson on behalf of Old Town in reviewing architectural services performed by plaintiff (Varsa). The general partner was Freeway Old Town, Ltd. The general partner of Freeway was Lobo Hijo Corporation. Cyril Wolfson was president of Lobo Hijo and he managed the offices of Old Town, Freeway and Lobo Hijo. John Peter Varsa and Wallace A. Wendell, plaintiffs, were shareholders in Lobo Hijo. Varsa was a director and officer. Cyril Wolfson was his stepfather. On July 24, 1972, Freeway, by way of Lobo Hijo and Wolfson, entered into a standard form contract with Varsa, for the performance of architectural services in the construction of a large hotel. This contract was taken over by Old Town later. During the construction of the Hotel, a limited partner and Wolfson met constantly to review the work done by the contractor and Varsa. At the end of construction, financial problems faced Old Town in the payment of its debts. To resolve the debts owed to Varsa, Varsa submitted two statements to Old Town for unpaid architectural services, one for $36,910.76 and the other for $2,553.94. After approving these amounts, Wolfson executed and delivered to Varsa, the Old Town promissory notes for the above respective amounts which totaled $39,464.70. A dispute arose between Old Town and Varsa over the amounts due for architectural services. Old Town claimed that $15,-935.95 was the amount due, and that the balance of $23,528.75 was not authorized in writing as provided in the contract. Old Town challenged the following findings of fact: 8. During the construction of the hotel, additional services were requested of . [Varsa] by Wolfson and agreed to by . . . [Varsa]. a. for the preparation of display boards; b. for furniture layout and interior consultation; and c. for the preparation of information and drawings necessary for 109 items in change orders to be performed at the rate of $25.00 per hour, which requests for additional services were not in writing. [Emphasis added.] ****** 10. Wolfson was the agent for . [Old Town] and had the authority to enter into the agreements for additional services and project representation for and on behalf of . [Old Town]. [Emphasis added.] 11. Both Wolfson and [Varsa] agreed to each modification to the Hotel Contract. ****** 13. Subsequent to receiving the March 31, 1975 statement, Wolfson advised . [Varsa] that Old Town Development did not presently have sufficient monies to pay the statement of March 31, 1975 [$36,910.76]. ****** 16. Subsequent to receiving the June 9, 1975 statement, Wolfson advised . [Varsa] that Old Town Development did not presently have sufficient money to pay the additional $2,553.94 billed on the statement of June 9, 1975. ****** 18. Wolfson had authority to execute the promissory notes on behalf of Old Town Development. Among many conclusions made by the court, the following are pertinent: 6. The promissory notes were given for antecedent debts and therefore no consideration needed to be proven. 7. There was good, valuable and adequate consideration for the modifications to the Hotel Contract . Old Town makes one point on appeal: QUESTIONED ITEMS TOTALLING $23,528.75, INCLUDED IN THE TWO NOTES OF 4/14/75 FOR $36,910.76, AND THE NOTE OF 6/19/75 FOR $2,553.94, SHOULD HAVE BEEN DISALLOWED BY THE COURT. Stated in this fashion, Old Town’s point means this to me: Old Town asserts that the two notes totalling $39,464.70 are composed of items that allegedly represent services performed by Varsa. Old Town claims that certain of those items in the amount of $23,528.75 should not be allowed and that Varsa should be limited to a recovery of $15,935.95. ■The items totalling $23,528.75 which Old Town questions are: a. Additional Architectural Services . . . $18,200.00 b. Additional Services............... 2,948.40 c. Kitchen Design Contract........... 300.35 d. Furniture Layout ............... 2,080.00 Total $23,528.75 The primary contention of Old Town is that the two notes in question are not supported by antecedent debts in excess of $15,935.35. Old Town claims there was a lack of consideration for the items totalling $23,528.75 and a violation of the architectural contract because there was no written authorization for the services billed. Article 3 of the Uniform Commercial Code relative to commercial paper is indirectly involved. Section 55-3-408, N.M.S.A. 1978 of the Uniform Commercial Code reads: Want or failure of consideration is a defense as against any person not having the rights of a holder in due course, except that no consideration is necessary for an instrument . . . given in payment of or as security for an antecedent obligation of any kind. Nothing in this section shall be taken to displace any statute outside this act under which a promise is enforceable notwithstanding lack or failure of consideration. Partial failure of consideration is a defense pro tanto whether or not the failure is in an ascertained or liquidated amount. [Emphasis added.] I think Old Town contends that there was a partial failure of consideration to the extent of $23,528.75. If established, this constitutes a pro tanto defense. Thus the recovery by Varsa would be precluded only to the extent of the partial failure of consideration. The burden is on Old Town to establish a partial failure of consideration. Oklahoma Nat. Bank v. Equitable Credit Finance Co., 489 P.2d 1331 (Okl.1971). Partial failure of consideration only goes to reduce recovery and in legal effect concedes the consideration sufficient to sustain the note. Parker v. McGaha, 291 Ala. 339, 280 So.2d 769 (1973). In determining whether the antecedent debt is sufficient consideration, the “antecedent debt” itself must be proven. An inquiry must be made into the validity of the antecedent debt to determine whether there was consideration for the debt. The first disputed item is additional architectural services submitted by Varsa of 109 items in change orders, construction inspection services beyond the agreement and 700 hours spent by job completion at $25.00 an hour for a total of $17,500.00 and a New Mexico state tax, at 4%, of $700.00, for a total of $18,200.00. It is Old Town’s contention that these “additional architectural services are not in fact additional services as provided in the contract; that they are basic services required to be performed under the contract; and in any event, additional services as provided in the contract are at the rate of $15.00 per hour, not $25.00 per hour. I agree with this last argument and dissent on this issue. Section 2(b) of the contract provides: FOR THE ARCHITECT’S ADDITIONAL SERVICES as described in Paragraph 1.3, compensation computed as follows: Principals’ time at the fixed rate of FIFTEEN dollars ($15.00) per hour. Article 12 of the Architect’s Agreement reads in part: . This Agreement may be amended only by written instrument signed by both Owner and Architect. [Emphasis added]. To me the word “only” means “exclusively,” regardless of the circumstances, and a “written instrument signed by both Owner and Architect,” is more strict than a provision prohibiting an amendment, except in writing. This agreement is a standard form provided by Architects for the protection of Architects. It was not intended to allow architects to violate the terms of the contract to seek protection. Seven hundred hours were spent on additional services. At $15.00 per hour rather than $25.00, Old Town is entitled to a credit of $7,000.00 plus interest on the total amount of the judgment. The battle took place over the meaning of paragraph 1.3 of the contract entitled “Additional Services.” It reads: If any of the following Additional Services are authorized by the Owner IN WRITING, they shall be paid for by the Owner as hereinbefore provided. [Emphasis added.] This language simply means that if Old Town permitted or allowed Varsa to render “Additional Services,” Old Town would pay. Section 1.3 is followed with 21 subsections. Section 1.3.11 included “Change Orders . . . not commensurate with the services required of the Architect.” One hundred and nine “Change Orders” were submitted by Varsa in writing to the contractor, each of them signed by Varsa, Old Town and the contractor. The “Change Orders” were permitted. These were structural changes that affected substantial portions of the Hotel, not ordinary in scope and effect and unusual in expenditures. These items amounted to $17,500.00 plus a New Mexico state tax of $700.00. The only testimony at trial was that of Varsa and the deposition of Wolfson. None of the four limited partners testified. One of the four limited partners was an attorney who represented Old Town. No architects were called by Old Town to dispute the claim for “Additional Services” for which Old Town was liable. Strenuous attempts were made by Old Town in argument with Varsa and Wolfson to color “Additional Services” with the paint of “Basic Services” required under the contract. The trial court heard the testimony and made the determination. We do not evaluate the difference between “Additional Services” and “Basic Services” in a multi-million dollar project. I affirm less reduction of $7,000.00 principal. The second disputed item is a charge of $2,948.40 for additional services beyond the basic contract. Although disputed, this item was actually paid by one of the limited partners. Varsa claims that since Old Town did not file a counterclaim for repayment of this sum, it is inappropriate for Old Town to advance such a claim for relief at this time; that this charge was never litigated and cannot be raised for the first time on appeal. This is frivolous. Varsa must not avoid payment with alacrity, at least without a grin on his face. I dissent on this issue. The amount of $2,948.40 plus interest should be reduced from the judgment entered. The third disputed item is one for $300.35 which is in excess of the guaranteed maximum for the kitchen design contract. I dissent on this issue. The final disputed item is one for $2,080.00 for furniture layout and consultant charges. This is covered by Section 1.3.8 of the contract and was not authorized by Old Town in writing. I dissent on this issue. It is my opinion that the judgment should be reduced in the sum of $12,328.75.