Summary
In Read v. Kipke, 535 P.2d 1130, 1131 (Colo. App. 1975), the court held that "Consideration need not be given by the payee of a note but may be given by a third party.
Summary of this case from Buffalo County v. RichardsOpinion
May 20, 1975.
Editorial Note:
This case has been marked 'not for publication' by the court.
Page 1131
Conover, McClearn, Burkhardt & Heppenstall, P.C., Hugh J. McClearn, J. David Arkell, Denver, for plaintiff-appellant.
Criswell & Patterson, John N. McNamara, Jr., John A. Criswell, Englewood, for defendant-appellee.
RULAND, Judge.
In an action to recover on a promissory note executed pursuant to a contract for the sale and purchase of real property, plaintiff, Alexandra M. Whittaker Read, appeals from the dismissal of her complaint. We reverse and remand for further proceedings.
The material facts are not disputed. On November 3, 1972, the defendant, Arthur H. Kipke, executed a printed form 'specific performance' contract for the purchase of certain vacant land containing three building sites in the City of Greenwood Village. The contract granted Kipke the option to close the transaction by tendering a pro rata share of the purchase price attributable to each building site on separate dates; however, kipke was obligated to complete the purchase of all three sites by August 1, 1973.
One parcel of the land covered by the contract was owned by Donald R. McLennan, Jr., Read's father, and Elinor P. McLennan as joint tenants, and the remaining parcel by Donald R. McLennan, Jr., and William L. McLennan as trustees of a trust created by the 'Alexandra Trust Agreement.' However, the contract was signed only by Donald R. McLennan, Jr., and William L. McLennan, and the contract failed to specify that they were acting in their capacity as trustees.
Pursuant to the contract, Kipke executed and delivered a $5,000 note payable to Read as earnest money for the purchase. The note provided that it was payable in full upon closing the sale of the first building site and in no event later than August 1, 1973.
Subsequently, a closing was scheduled, but Kipke failed to appear, and he was thereafter advised that 'the McLennans' elected to treat the contract as terminated. The down payment was declared forfeited, and demand for payment on the note was made. Upon Kipke's failure to pay, Read initiated the present action on the note.
Prior to trial, Kipke admitted execution of the note, delivery to Read, and nonpayment. However, he denied and liability for payment of the note asserting various defenses based upon the contract, and including failure of consideration for the note.
The pre-trial order under the caption 'uncontroverted facts,' recited that '(s)ellers were ready, able and willing to convey marketable title to the property covered by the contract at the date and time of (sic) the place set for the closing.' The parties stipulated that deeds executed by the record owners of the property which were tendered to Kipke prior to the aborted closing were admissible in evidence, and the deed from the trustees reflected their execution of the documents in that capacity.
Following a trial to the court, the court found that Kipke was obligated to close on the contract, and that, in effect, the 'sellers' had not breached any of their obligations under the contract relative to subdivision regulations of the City. Kipke does not appeal from this ruling.
However, the court also found that Read had not given any consideration for the note and lacked standing to seek recovery thereon since Read did not own any interest in the land covered by the contract. In denying Read's motion for a new trial, the court also ruled that to the extent the contract purported to cover land belonging to the trust, it was unenforceable because the document was improperly executed by persons who held title as trustees. On the basis of the foregoing, the trial court dismissed Read's complaint and denied her motion for a new trial.
Insofar as the court ruled that the note was unenforceable because there was no consideration from Read to Kipke, the parties agree on appeal that this constituted error. Consideration need not be given by the payee of a note but may be given by a third party. Behrens v. Apessos, 39 Mich.App. 426, 197 N.W.2d 886; 1 S. However, since the contract was not signed by the trustees in their capacity as such, Kipke contends that it was unenforceable. Further, Kipke relies on the fact that there was no evidence indicating the trustees had authority to sell the property held by them in trust, and thus, in effect, he was entitled to rescind the contract for failure of consideration.
In regard to the trustees' execution of the contract, we are unable to reconcile the reference in the pre-trial order to the sellers' ability to convey title as an 'uncontroverted fact,' with the trial court's ruling as to the invalidity of the contract. Moreover, a review of the record reflects that neither of the parties focused on this issue until the trial court commented thereon from the bench at the conclusion of the trial. Thus, it is unclear whether the implications of the statement in the pre-trial order were considered by the parties and the trial court. It is further apparent that much of the relevant evidence was not introduced. Hence, we conclude that a new trial should be granted on the issue of the McLennans' authority to transfer the property pursuant to the contract.
Kipke asserts in the alternative that the judgment should be affirmed because, when the note and contract are construed together, we must conclude that Read is entitled to payment on the note only if the contract is not terminated. In the event of termination, Kipke asserts that, by the terms of the contract, payment is due the sellers named in the contract. Read answers that the provisions of the note control over the printed provisions of the contract and that the sellers are not entitled to payment. It appears that the documents when construed together are ambiguous, and the trial court has not ruled on this issue, as well as the further issue of whether the sellers must be joined as indispensable parties. C.R.C.P. 19. Since the case must be remanded for a new trial, the trial court should consider these issues also.
Judgment reversed and cause remanded for a new trial consistent with the views herein expressed.
VanCISE and STERNBERG, JJ., concur.