Converse v. Zinke, 79SC366

• Citation: 635 P.2d 882
• Decision Date: 19 October 1981
• Docket Number: No. 79SC366,79SC366
• Parties: Dorothy E. CONVERSE, Petitioner, v. John M. ZINKE and Beverly A. Zinke, Respondents.
• Court: Supreme Court of Colorado

Page 882

635 P.2d 882

Dorothy E. CONVERSE, Petitioner, v. John M. ZINKE and Beverly A. Zinke, Respondents.

No. 79SC366.

Supreme Court of Colorado, En Banc.

Oct. 19, 1981.

Paul Snyder, Bradley J. Yoder, Castle Rock, for petitioner.

Carvell & Mullens, Steven V. Mullens, Pueblo, for respondents.

LEE, Justice.

We granted certiorari to review the decision of the court of appeals in Converse v. Zinke, Colo.App., --- P.2d ---- (Ct.App.No. 78-462, announced October 18, 1979). We affirm in part and reverse in part and remand to the district court for the calculation of attorney's fees incurred in this appeal.

This action resulted from the sale of Converse's equipment rental business to the Zinkes for $10,000 cash and a $26,000 promissory note secured by a lien on the personal property transferred. The Zinkes failed to make the required note payments and Converse filed suit to foreclose on the security interest in the rental property. The Zinkes answered, alleging failure of consideration and fraud and counterclaimed for fraud and breach of express and implied warranties.

The dispute centers around the condition of the rental equipment on the date of its transfer to the Zinkes. The Zinkes' testimony indicated that much of the equipment was inoperable and could not be rented, and that Converse had promised to have the equipment in good condition on the date of transfer. Converse testified that the equipment was in good condition, that equipment which was not in good condition was accepted by the Zinkes, and that the sale was on an "as-is" basis. There was supporting testimony which corroborated both versions. The issues were submitted to the jury by special verdict and interrogatories. The jury found a failure of consideration for the promissory note, thereby disallowing Converse's claim on the note, as well as the claim for foreclosure on the security interest. The jury found in favor of the Zinkes on the warranty claims, awarding damages of $8,500 on the express warranty but refusing to award damages on the implied warranty claim.

After the jury verdict was returned, the following exchange took place:

MR. SNYDER (Converse's attorney): "The Plaintiff would like ten days in which to consider this matter and ten days in which to make motions."

THE COURT: "Mr. Snyder, under the revised rules you are entitled to 15 days. If you would like that that will be the order of the Court."

MR. SNYDER: "Yes, if the Court please, we would like 15 days."

THE COURT: "Plaintiff has 15 days within which to file motions."

On February 6, 1978, 16 days after the jury returned its verdict, ¹ Converse filed a motion for a judgment notwithstanding the verdict and for a new trial. See C.R.C.P. 50(b) and 59. On March 17, 1978, the trial court entered a judgment notwithstanding the verdict in favor of Converse, ruling as a matter of law that the note was "supported by consideration." The motion for new trial was denied.

The Zinkes filed a notice of appeal which stated that the Zinkes would "file an appeal of the above-captioned matter."

The court of appeals reversed the judgment notwithstanding the verdict. It found that C.R.C.P. 50(b) required the filing of a motion for judgment notwithstanding the verdict within ten days of the receipt of the verdict, and that under C.R.C.P. 6(b) no extensions of time are permissible. ² Since the motion for judgment notwithstanding the verdict was not filed within the time limit, the court of appeals held that the district court lacked jurisdiction to rule on the motion and remanded the case to the trial court for a hearing on the motion for new trial. The court of appeals rejected the other claims of reversible error regarding jury instructions, denial of motions for directed verdicts, and erroneous evidentiary rulings. It affirmed the judgment in favor of the Zinkes on their counterclaims for breach of warranties.

Converse urges reversal of the judgment of the court of appeals for the following reasons. She claims that the Zinkes' notice of appeal to the district court is defective; that the district court did have jurisdiction to enter a judgment notwithstanding the verdict; that the issues of express and implied warranty should not have been submitted to the jury; that there was insufficient evidence to support the jury verdict of $8,500 on the express warranty claim; that the jury was improperly instructed on contract interpretation; and that, should she prevail in this appeal, she is entitled to attorney's fees on appeal.

I.

Converse's first claim is that the Zinkes' notice of appeal was insufficient to meet the requirements of C.A.R. 3(c). C.A.R. 3(c) provides:

"(c) Content of the Notice of Appeal. The notice of appeal shall specify the party or parties taking the appeal and shall designate the judgment, order, or part thereof appealed from."

The Zinkes' notice of appeal stated that they will file an appeal of the "above-captioned matter." While this may be a technical violation of C.A.R. 3(c) since it did not designate the judgment, order, or part thereof appealed from, we agree with the court of appeals that:

"... (s)ince non-compliance with C.A.R. 3(c) does not affect the validity of the appeal, C.A.R. 3(a), and since there can be no doubt in this instance that the only court action to which defendants would object is the entry of the judgment notwithstanding the verdict, we will not insist on strict compliance here. See C.A.R. 2; Service Oil Co. v. Rhodus, 179 Colo. 335, 500 P.2d 807 (1972); Happy Canyon Investment Co. v. Title Insurance Co., 38 Colo.App. 385, 560 P.2d 839 (1976)." Converse v. Zinke, supra.

We affirm the court of appeals on this claim of error.

II.

The district court granted Converse 15 days to file post-trial motions. Converse relied on this ruling and filed a motion for judgment notwithstanding the verdict on the last day of that period. We hold that the trial court did not lose jurisdiction to rule on the motion under the circumstances of this case.

The court of appeals held that unless the motion for judgment notwithstanding the verdict was filed within the ten day time limit under C.R.C.P. 50(b), the district court had no jurisdiction to rule on the motion. See Ross v. Arrow Manufacturing Co., 134 Colo. 530, 307 P.2d 196 (1957). This ruling was based on the fact that C.R.C.P. 6(b) expressly limits the trial court's ability to extend time for acting under C.R.C.P. 50(b). ³

Although the language of C.R.C.P. 6(b) is mandatory, there is a recognized narrow exception to the rule. Some federal courts have adopted the "unique circumstances" exception to Fed.R.Civ.P. 6(b). ⁴ Harris Truck Lines v. Cherry Meat Packers, 371 U.S. 215, 83 S.Ct. 283, 9 L.Ed.2d 261 (1962); Wolfsohn v. Hankin, 376 U.S. 203, 84 S.Ct. 699, 11 L.Ed.2d 636 (1964); Chipser v. Kohlmeyer Co., 600 F.2d 1061 (5th Cir. 1979); and Eady v. Foerder, 381 F.2d 980 (7th Cir. 1967). This exception may apply if a party reasonably relies and acts upon an erroneous or misleading statement or ruling by a trial court regarding the time for filing post-trial motions. In such circumstances the trial court does not lose jurisdiction to enter an order on the motion for a judgment notwithstanding the verdict. In our view, the circumstances of this case warrant the application of the "unique circumstances" exception, and we therefore hold that the district court had jurisdiction to enter an order on the motion. ⁵

The Zinkes, however, also challenge the granting of the motion on substantive grounds. They assert that there was a failure of consideration, and that they therefore owe nothing on the promissory note. Although the Zinkes pleaded the defenses of "lack of consideration" and "failure of consideration," only the defense of failure of consideration was submitted to the jury. ⁶

Failure of consideration, however, should not be confused with lack of consideration for the underlying contract, since failure of consideration generally refers to failure of performance of a contract. J. Calamari and J. Perillo, Contracts, § 11-25 (2d ed. 1977). The modern trend is to avoid use of the term "failure of consideration" because it may be misleading. See Restatement (Second) of Contracts, § 237, Comment a (1981).

Proof of a material failure of consideration may excuse a party from performing its duties under a contract. If one party has failed to perform the bargained for exchange, the other party may be relieved of a duty to continue its own performance, where the failure is material and unexcused. However, an incomplete performance may not amount to a material failure which would fully excuse a duty to return performance, when the performance given may be considered an equivalent to the performance owed. See Restatement (Second) of Contracts, §§ 237 and 240 (1981). The extent to which an injured party will obtain substantial benefit from the contract, as well as the adequacy of compensation in damages, should be considered in determining the materiality of failure of performance. Restatement (Second) of Contracts, § 241 (1981).

From the record in this case, we have been able to ascertain that the Zinkes offered evidence that about 71 of approximately 273 items of inventory purchased were in need of repair or were inoperable when the sale was completed. It is thus apparent that the evidence was not adequate to prove a total failure of consideration, which would excuse the Zinkes' payment of the balance of the purchase price. Viewing the evidence offered at trial, the jury apparently determined that the loss of value received due to defective or inoperable equipment was $8,500. Since the purchase price of the business was $36,000, the failure of consideration can be considered only as a partial failure. Generally, a partial failure of consideration imports a breach of contract, but not a breach sufficient to relieve the injured party of the duty of performance. Thus, a partial failure of the consideration may be a...