Bank of N. M. v. Rice

• Decision Date: 08 May 1967
• Docket Number: No. 8231,8231
• Parties: , 4 UCC Rep.Serv. 314 BANK OF NEW MEXICO, a banking corporation, Plaintiff-Appellant and Cross- Appellee, v. Earl B. RICE and Lahoma Rice, his wife, Defendants-Appellees and Cross- Appellants, and Earl Rice Construction Company, Inc., Intervenor-Appellee.
• Court: New Mexico Supreme Court

Page 368

429 P.2d 368

78 N.M. 170, 4 UCC Rep.Serv. 314

BANK OF NEW MEXICO, a banking corporation, Plaintiff-Appellant and Cross- Appellee, v. Earl B. RICE and Lahoma Rice, his wife, Defendants-Appellees and Cross- Appellants, and Earl Rice Construction Company, Inc., Intervenor-Appellee.

No. 8231.

Supreme Court of New Mexico.

May 8, 1967.

Rehearing Denied July 17, 1967.

Marron & Houk, Dan A. McKinnon, III, Albuquerque, for appellant and cross-appellee

Toulouse, Ruud, Gallagher & Walters, Dolan & Clear, Menig & Sager, Albuquerque, for appellees and cross-appellants and intervenor-appellee.

OPINION

WOOD, Judge, Court of Appeals.

The issues involve a contract to lend money, damages for breach of contract and a directed verdict on promissory notes.

Plaintiff sued defendants to recover the balance due on two promissory notes. Defendants counterclaimed, alleging breach by plaintiff of a contract to lend money. Corporation (Earl Rice Construction Company, Inc.) intervened, claiming breach of the same contract to lend money. The jury found for Rice (Earl B. Rice) on the counterclaim and for the corporation on the complaint in intervention. Plaintiff appeals from the judgment entered on these verdicts. Defendants cross appeal from the trial court's action in directing a verdict in favor of plaintiff on the notes. We decide the cross appeal first.

Plaintiff is the holder of the two notes which were executed by Mr. Rice and guaranteed by Mrs. Rice. The notes having been produced and the signatures established, plaintiff was entitled to recover unless the defendants established a defense. See § 50A-3-307, N.M.S.A.1953.

Defendants contend that the evidence raises a question of fact as to payment on the notes, as to computation of interest, as to consideration and as to discharge of the larger note because of alteration. It also contends that even if the evidence is undisputed, the evidence is such that the jury should have determined whether the evidence was to be believed. Thus, it asserts that it was error to direct a verdict.

The court, in considering the motion for directed verdict, must look at the evidence in the light most favorable to the party resisting the motion, including every inference in support of the party moved against and ignoring conflicts in the evidence unfavorable to him. If reasonable minds may differ as to the conclusion to be reached under the evidence or the permissible inferences, the question is for the jury. Jones v. New Mexico School of Mines, 75 N.M. 326, 404 P.2d 289 (1965). Under this rule, plaintiff may obtain a directed verdict. Heisch v. J. L. Bell & Co., 11 N.M. 523, 70 P. 572 (1902). See Melhop v. Costa, 26 N.M. 337, 192 P. 477 (1920). We apply the rule here.

The evidence traces the history of the two notes. This evidence shows the renewal of one of them, a partial payment (leaving the balance due claimed by plaintiff) and the transfer of the notes from plaintiff's uptown to its downtown branch. It shows the misposting of the notes to the corporation and correction of that misposting. It shows a portion of the notes were charged off as loss.

Defendants contend that plaintiff's ledger entries raise a question of fact concerning payment. The ledger at the uptown branch was debited with the amount due, leaving a zero balance. However, the downtown ledger was credited with the same amount. The evidence is undisputed that these were matching entries made in keeping books on the transfer between the branches.

There is evidence concerning payments on other notes and transfer of at least some of these notes between the branches. This evidence shows the balance on these other notes was eventually reduced to zero either by payments made or by charge off through foreclosure.

There is no conflict in the above evidence. Taken in the light most favorable to defendants, it does not support an inference that payment had been made on the amount claimed to be due. This evidence would not support an inference that plaintiff had failed to apply any payments to the two notes here involved.

Defendants assert that even if plaintiff is entitled to the amount claimed on the larger note, the evidence indicates the amount of interest claimed is erroneous. At trial the testimony as to the amount of interest due was not disputed. Here, defendants present their own mathematical computation to demonstrate an error of approximately $35.00 in the amount of interest. This disagreement as to the amount of interest is not a conflict in the evidence; it comes after a trial at which there was no issue concerning the amount of interest due. It is not an issue here. Even if it were an issue, defendants gain nothing since the interest awarded in the judgment is less than defendants' own computation.

Defendants assert there is an issue of fact on the defense of consideration. They say there is a question as to consideration because one of the notes had been renewed. This is answered by § 50A-3-408, N.M.S.A.1953, which provides in part:

'* * * (N)o consideration is necessary for an instrument or obligation thereon given in payment of or as security for an antecedent obligation of any kind.'

There were two alterations of the larger note. (1) The note was in the amount of $77,905.00. This amount had been crossed out and the figure $54,255.00 had been penciled in. This lesser figure was the balance remaining after a payment was made. It is the amount sued for, and it is the amount of the judgment entered on the directed verdict. (2) A red line was drawn across the face of the note. The evidence is that this line was drawn by the Bank Examiner to indicate he had examined the note.

Defendants contend that these alterations raise a question of fact as to whether they were discharged from liability on the note. Section 50A--3--407, N.M.S.A.1953, pertains to alteration of commercial paper. It provides in part:

'(2) As against any person other than a subsequent holder in due course

'(a) alteration by the holder which is both fraudulent and material discharges any party whose contract is thereby changed unless that party assents or is precluded from asserting the defense;' The statute is not applicable unless the alteration made by the holder was fraudulent. There is no evidence from which an inference of fraud could be drawn, and thus no question of fact for the jury concerning discharge.

There is no conflict in the evidence concerning the notes and the ledgers. Defendants contend that it was for the jury to determine whether the evidence was to be believed. They point out that plaintiff's case was made out by the bank's records and by the bank's employees. Relying on Morrill v. Jones, 26 N.M. 32, 188 P. 1108 (1920), they assert that the employee being an interested party, the credibility of the evidence was for the jury.

The fact that a witness is interested or disinterested is not the basis for determining whether his testimony is or is not to be believed. Medler v. Henry, 44 N.M. 275, 101 P.2d 398 (1940), lists four categories where the trier of facts could disregard undisputed testimony. The two categories on which defendants rely are (1) suspicious circumstances surrounding the transaction testified to by the bank employees and (2) that inferences drawn from the facts and circumstances cast doubt on the truth or accuracy of the undisputed evidence. There is nothing in the record here on which to base application of either category. The circumstances here are neither suspicious nor do any inferences that may be drawn cast doubt on the accuracy of the undisputed evidence.

The trial court did not err in directing the verdict in favor of plaintiff.

We now decide the issues raised by the appeal.

The issue submitted to the jury, without objection, was:

'Did the Bank of New Mexico agree that it would lend Rice Construction Company $405,000.00 on the twenty-seven lots described in the mortgage dated 25 April 1962, at $15,000.00 per lot, when construction thereon was completed through the stage of Second Federal Housing Administration Inspection, * * * in consideration of which promise by the Bank, Rice Construction Company agreed to borrow from the Bank its construction money as needed on each of the lots? * * *'

The jury was also instructed that if it found such an agreement, and that the bank breached the agreement, it was to ascertain the damages suffered by either Mr. Rice or the Earl Rice Construction Company as a proximate result of the breach.

Plaintiff contends that it was error to allow the jury to award damages in favor of Rice for breach of a contract to which Rice was not a party.

It is a general rule of law that one who is not a party to a contract cannot maintain a suit upon it. Staley v. New, 56 N.M. 756, 250 P.2d 893 (1952); see Crawford v. Taylor, 58 N.M. 340, 270 P.2d 978 (1954); Cillessen v. Kona Company, 73 N.M. 297, 387 P.2d 867 (1964). A third party may be the beneficiary of such a contract, and as a beneficiary may have an enforceable right against a party to the contract. Permian Basin Investment Corp. v. Lloyd, 63 N.M. 1, 312 P.2d 533 (1957); Hoge v. Farmers Market & Supply Co., 61 N.M. 138, 296 P.2d 476 (1956); Key v. George E. Breece Lumber Co., 45 N.M. 397, 115 P.2d 622 (1941). The problem of determining whether a contracting party is liable to a third party beneficiary involves the law of contract. Permian Basin Investment Corp. v. Lloyd, supra.

Rice asserts personal damage to himself resulting from the manner in which the contract was breached, a claim personal to himself based on plaintiff's conduct in breaching the contract. Rice does not sue for breach of contract.

There is an assertion in Rice's brief (unsupported by a transcript reference) that Mr. Rice owned all the stock in the corporation. Nevertheless, the corporation and a stockholder are separate entities. Shillinglaw v. Owen Shillinglaw Fuel Co., 70 N.M. 65, 370 P.2d 502 (1962); London v. Bruskas, 64 N.M. 73, ...