Daniels v. Englehart

• Decision Date: 19 September 1910
• Citation: 111 P. 3,18 Idaho 548
• Parties: FRED B. DANIELS, Appellant, v. FRANK ENGLEHART, Respondent
• Court: Idaho Supreme Court

111 P. 3

18 Idaho 548

FRED B. DANIELS, Appellant, v. FRANK ENGLEHART, Respondent

Supreme Court of Idaho

September 19, 1910

PROMISSORY NOTE-FAILURE OF CONSIDERATION-DEFENSE-RESCISSION AND DAMAGES.

(Syllabus by the court.)

1. The maker of a promissory note cannot avoid payment of the same on the grounds of failure of consideration, where the answer and proofs admit that there was not a total failure of consideration and that he in fact received and retains a part of the consideration as the same was agreed upon.

2. Where there has been a partial failure of consideration for the execution of a promissory note, the maker of the note, in order to obtain relief, must either rescind the contract and return the consideration received or claim damages for breach of the contract or pursue some remedy whereby the holder of the note may be enabled to receive just compensation for such part of the consideration as actually passed.

APPEAL from the District Court of the Fourth Judicial District, in and for Elmore County. Hon. Edward A. Walters, Judge.

Action on promissory note. Judgment for defendant. Plaintiff appealed. Reversed.

Judgment reversed, with costs in favor of appellant.

E. M Wolfe, for Appellant.

The failure of the defendant to set up in his answer either a rescission of the contract or an offer to return the water right puts it beyond him to refuse the payment of the note. (Cowen v. Harrington, 5 Idaho 329, 48 P. 1059; Caldwell v. Ruddy, 2 Idaho 5 (1), 1 P. 339.)

Plaintiff having purchased the note before maturity, and for value even though he was an officer of the company from which he purchased it, and knew that the note was given for a water right, that fact alone would not bar him from the right to recover, and would not change his position as a bona fide purchaser, unless he knew that the company had defaulted before his purchase of the note. (United States Nat. Bank v. Floss, 38 Ore. 68, 84 Am. St. 752, 62 P. 751; Siegel v. Chicago Trust & Savings Bank, 131 Ill 569, 19 Am. St. 51, 23 N.E. 417, 7 L. R. A. 537; 1 Beach, Private Corp., sec. 245.)

J. G. Watts, for Respondent.

It cannot be contended that the appellant herein took this note in good faith. The evidence shows almost an entire failure of consideration. It further shows that the respondent cannot rescind and be restored to his original rights by the return of his money, for the reason that he has exhausted through this deal his right with the government for a desert entry, that he has made large improvements on the land which cannot be recovered in an action for damages, the property of the Great Western being in the hands of a receiver. (Secs. 3485, 3509, 3515, Rev. Codes.)

AILSHIE, J. Sullivan, C. J., concurs.

OPINION

AILSHIE, J.

This is an action on a promissory note. Plaintiff alleged that he was a bona fide purchaser of the note prior to maturity. Defendant answered admitting the execution of the note and that the same had not been paid, but denied that the plaintiff was a bona fide holder of the note by indorsement prior to maturity thereof.

The defendant also alleged as a defense that the note was executed as part payment for a water right from the Great Western Beet Sugar Co., and that the company promised and agreed to construct reservoirs, canals and ditches and furnish the defendant with water for his tract of land, comprising 160 acres, which constituted the consideration for the note sued upon. It was also alleged in the answer that the plaintiff was vice-president and agent of the Great Western Beet Sugar Co. at the time the contract was made and the note was executed, and that he had full knowledge of the consideration and the terms of the agreement entered into.

The defendant by way of showing failure of consideration alleged in paragraph 9 of his answer as follows:

"That said ditch was not completed as agreed by the said Great Western...