Hart v. Hart

• Decision Date: 18 July 1968
• Docket Number: No. 52997,52997
• Citation: 160 N.W.2d 438
• Parties: John L. HART, Appellant, v. E. Frank HART, Appellee.
• Court: Iowa Supreme Court

Page 438

160 N.W.2d 438

John L. HART, Appellant, v. E. Frank HART, Appellee.

No. 52997.

Supreme Court of Iowa.

July 18, 1968.

Fitzgibbons & Fitzgibbons, Estherville, and Sackett & Sackett, Spencer, for appellant.

Alan Loth, Fort Dodge, and Cornwall, Cornwall & Avery, Spencer, for appellee.

RAWLINGS, Justice.

Plaintiff brought action at law on a promissory note. Trial jury unable to agree on verdict was discharged. Motions by plaintiff for judgment notwithstanding jury's failure to agree, with alternate motion to adjudicate law points relative to instructions given were both overruled. Plaintiff takes permissive appeal. We reverse.

According to the record this, in substance, is the factual situation here presented.

Plaintiff, John L. Hart, and defendant, E. Frank Hart, sometimes hereinafter referred to as John and Frank, respectively, are brothers.

Originally John and Dale E. Norton were partners, engaged in operation of a Chevrolet agency at Spencer. In 1939 John and Frank obtained the Spencer Ford franchise and commenced business under an oral arrangement as Hart Motors, a partnership.

Sometime in 1955 a written agreement was executed by the brothers. July 1, 1956, a new pact was prepared and signed. This last instrument provided the brothers would operate on a 50--50 basis, John to be manager, spending only the time he deemed necessary in supervisory work, and receive a salary of $1000 each month until June 30, 1963. It also provided if either partner withdrew the other would select and receive the first $85,000 in assets, remainder to be divided equally.

The partnership prospered, at one time holding assets having an appraised value of $880,000.

In 1957 the Spencer Chevrolet agency became available. With John's help Frank sought and obtained it. In accord with an attendant demand by General Motors, John agreed to discontinue operation of the automobile business in Spencer and abandon use of the name 'Hart' in connection with any car dealings.

An agreement providing for partial distribution of partnership property was then entered into which provided, in part, the 1956 agreement was to remain in effect.

After Frank commenced the Chevrolet operations he began urging termination of the 1956 compact. In 1958 papers providing for dissolution of the partnership were prepared but John refused to sign for these given reasons: (1) his monthly salary of $1000 would be terminated; (2) he was entitled to the first $85,000 in partnership assets since Frank was withdrawing; (3) there was owing to him, by agreement, an equal benefit in a $23,400 tax loss carry-over resulting from acquisition of the Chevrolet agency; (4) he had suffered a business loss by abandonment of automobile dealings in Spencer and use of the name 'Hart'.

Ultimately, on August 8, 1959, John signed the dissolution agreement. He contends this was done after extended negotiations relative to the four matters listed above, which culminated in a compromise under which Frank signed the note here in dispute.

Our order granting plaintiff leave to appeal provided in material part: 'After full consideration it is felt that the application may properly be considered as asking authority to appeal in advance of final judgment from those of the trial court's instructions to the jury given upon the trial of the case resulting in a hung jury which had the effect of limiting plaintiff's recovery to the sum of.$23,500 rather than $85,000, and interest, for which judgment was prayed, provided timely objection was made at the trial to the instructions referred to.

'Accordingly, permission is hereby granted plaintiff to appeal in advance of final judgment from so many of the trial court's instructions as are above referred to.'

Consequently, regardless of errors assigned, we confine our review to recovery-limiting-jury-instructions 9, 11, 12 and 13, to each of which plaintiff made timely and appropriate objection.

The basic issue resultantly presented is whether trial court erred in treating the aforesaid reasons given by plaintiff for refusal to sign the partnership dissolution agreement as separate elements of consideration.

I. John's action against Frank is based upon this instrument:

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

By his answer Frank denied execution of the foregoing note. However, during presentation of evidence he admitted his signature is affixed to the subject instrument, but contended the handwritten provisions were later inserted without his authorization. With regard to the filling in of blank spaces in a promissory note, see Code section 541.14; Knapp v. Knapp, 251 Iowa 44, 53--54, 99 N.W.2d 396; Windahl v. Vanderwilt, 200 Iowa 816, 821--822, 203 N.W. 252; and Republic National Bank of Dallas v. Strealy, 163 Tex. 36, 350 S.W.2d 914, 916--920.

Absent a motion of record by defendant, or prior order, trial court, over plaintiff's objection, advised the jury by the aforesaid instructions 9, 11, 12 and 13, plaintiff could not be allowed recovery in excess of.$23,500, being the amount lost to him through claimed termination of his salary allowance.

By virtue of the fact our Uniform Commercial Code, chapter 554, Code, 1966, did not become applicable until July 4, 1966, we shall here refer to relevant provisions of the 1962 Code, unless otherwise specifically disclosed.

Code section 541.24, provides: 'Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration, and every person whose signature appears thereon to have become a party thereto for value.' See also Bjornsen Construction Co. v. J. A. Whitmer & Sons, 254 Iowa 888, 893--894, 119 N.W.2d 801.

And, section 541.25, states: 'Value is any consideration sufficient to support a simply contract. An antecedent or pre-existing debt constitutes value, and is deemed such, whether the instrument is payable on demand or at a future time.'

As we said Test v. Heaberlin, 254 Iowa 521, 523--524, 118 N.W.2d 73, 74: 'The most widely used definition of 'consideration' is a benefit to the promisor or a loss or detriment to the promisee. Wright v. Iowa Southern Utilities Co., 230 Iowa 838, 841, 298 N.W. 790, 793, and citations.' See also Restatement, Contracts, sections 75 and 81.

Rounds v. Butler, 207 Iowa 735, 223 N.W. 487, involved an action on a promissory note, with absence of consideration asserted as one defense. There, at page 737 of the Iowa Reports, Vol. 207, at page 488 of 223 N.W., we said: 'The claim of the plaintiff is that this note was given as a compromise and settlement of a disputed claim between him and the defendant. This line of authority is well settled in this state. It is immaterial that on a trial it might be found that the claim was unfounded in fact, but if such claim is asserted in good faith, and without fraud, settlement must stand. We have lately elaborated this doctrine in the cases of First Nat. Bank of Alta v. Browne, 199 Iowa 981, 203 N.W. 277; Smith v. Smith, 206 Iowa 606, 219 N.W. 512.

'There can be no question, under the evidence, that there was a disputed claim between these parties. The question then left is whether or not the claim made by the plaintiff was in good faith, or whether it was tainted with fraud, undue advantage, or duress. Whether such a claim is asserted in good faith is ordinarily a question for the jury. 12 Corpus Juris 333.'

Later, in Booth v. Johnston, 223 Iowa 724, 273 N.W. 847, we were confronted with another action on a promissory note countered by alleged absence of consideration. Dealing with what is now identified as Code section 541.24, quoted supra, this court stated, loc. cit., 223 Iowa 728, 273 N.W. 848: 'Whether or not the presumed consideration was lacking imposed a burden of proving it upon the defendant who asserted it, and in our view of the record defendant's proof failed in that regard. As will be seen from the facts hereinbefore recited, approximately $1,300 accrued on the old note was forgiven and the new note made to Mrs. Booth. We feel that the court was warranted in concluding, if it so found, that the transaction amounted substantially to the settlement of what was, or at least might have been in the light of defendant's present contention, a controverted matter. Since no fraud was claimed the case may be considered without stopping to inquire what the result might have been had it been pleaded.'

To the same effect is the following statement in Messer v. Washington Nat. Ins. Co., 233 Iowa 1372, 1381, 11 N.W.2d 727, 732:

'This court on many occasions has had before it the question of the effect of compromise and settlement. It is hardly necessary for us to say that such are favored by law, and our examination of cases from other jurisdictions reveals that our courts are in line with the great majority of such courts. We will examine and set forth a few of the Iowa cases dealing with this subject.

'In Urdangen v. Fryer, 183 Iowa 39, 41, 166 N.W. 693, this court, speaking through Ladd, J., on the subject of compromise and settlement, said:

"If disputed claims are asserted in good faith, even though judicial investigation might have demonstrated them to have been unfounded in fact, the settlement thereof furnishes a sufficient consideration for the settlement agreement.' Citing Greenlee v. Mosnat, 116 Iowa 535, 90 N.W. 338.

'See, also, Salinger v. Glidden Farmers' Elevator Co., 210 Iowa 668, 231 N.W. 366; Heflen v. Brown, 208 Iowa 325, 223 N.W. 763. In the case of First National Bank of Alta v. Browne, 199 Iowa 981, 984, 203 N.W. 277, 278, the court said:

"It is immaterial that a judicial investigation might demonstrate the claim to be unfounded in fact, if in fact the asserted claim is made in good faith."

More recently we declared in White v. Flood, 258 Iowa 402, 409, 138 N.W.2d 863: 'The rule is well established that compromise of a doubtful right asserted in good faith is sufficient consideration for a promise. (Authorities cited).'

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