Wendell v. Foley

• Decision Date: 10 April 1979
• Docket Number: No. 3464,3464
• Citation: 92 N.M. 702,1979 NMCA 52,594 P.2d 750
• Parties: , 26 UCC Rep.Serv. 1204 Wallace A. WENDELL and John P. Varsa d/b/a Wendell-Varsa & Associates, Plaintiffs-Appellees, v. James H. FOLEY, Old Town Development Company, Defendants-Appellants, Reliable Productions, Inc., Intervenor.
• Court: Court of Appeals of New Mexico

Page 750

594 P.2d 750

92 N.M. 702, 26 UCC Rep.Serv. 1204

Wallace A. WENDELL and John P. Varsa d/b/a Wendell-Varsa &amp Associates, Plaintiffs-Appellees, v. James H. FOLEY, Old Town Development Company, Defendants-Appellants Reliable Productions, Inc., Intervenor.

No. 3464.

Court of Appeals of New Mexico.

April 10, 1979.

Writ of Certiorari Denied May 3, 1979.

Quincy D. Adams, Adams & Foley, Albuquerque, for defendants-appellants

Lewis O. Campbell, Campbell, Cherpelis & Pica, Albuquerque, for plaintiffs-appellees.

OPINION

WALTERS, Judge.

Wolfson was president of Lobo Hijo Corporation (Lobo). Lobo Hijo was the general partner of Freeway Old Town, Ltd. (Freeway), and Freeway was the general partner of Old Town Development Company (Old Town). Plaintiff Wendell-Varsa and Associates (W-V) contracted in July 1972 with Freeway to provide architectural services for construction of an Albuquerque hotel. Freeway's obligation under the contract was assumed by Old Town on September 9, 1973. Wolfson managed the affairs of Freeway, Old Town and Lobo. Varsa, of W-V, was Wolfson's stepson and was a shareholder, director or officer of Lobo during the entire period of the contract and at the time of the trial. W-V sued Old Town for unpaid billings which included two promissory notes executed by Wolfson on behalf of Old Town.

The architectural contract provided a fixed fee for basic services, with additional approved services to be compensated at $15.00 per hour. It required that any amendments to the contract and any authorizations to the architect for additional services had to be made in writing. The only request made by Wolfson in writing for services outside the basic contract was for W-V to hire a kitchen consultant. Wolfson, however, approved change orders prepared by W-V for display boards, for furniture layouts and interior consultation, for preparation of information and drawings connected with 109 items in six change orders at $25.00 per hour, and for project representation beyond the basic services required by the contract by W-V at the hourly rate of $25.00. W-V submitted periodic bills covering those items, which Old Town was unable to pay. Ultimately, in April and June 1975, two promissory notes were executed by Wolfson on behalf of Old Town to cover the amount of W-V's billings, aggregating $39,464.70, plus interest. W-V thereafter rendered two more bills for additional services performed by W-V under a separate contract (termed "Lobby Expansion" contract by the parties). At time of trial neither the lobby billings of $10,771.63 nor the notes had been paid.

The trial court found that Wolfson had authority to approve additional services, to agree with W-V for such services, and to execute the notes on behalf of Old Town. It concluded that the promissory notes were given for antecedent debts and therefore did not require consideration. Judgment in the amount of the notes, plus interest and attorney fees, and for the unpaid billings on the lobby contract was entered against Old Town.

This appeal has been brought by Old Town asserting error in the amount awarded for (a) failure of consideration, and (b) lack of authority in Wolfson to orally approve additional services. Old Town contends that $23,528.75 of the total covered by the notes should have been disallowed, because services represented by that amount were not additional but required under W-V's basic contract. It further claims that in any event billings should have been at $15 per hour, not $25; and that none of the change orders were made by written request of its agent. Old Town argues there was a failure of consideration for the alleged underlying "antecedent debt." Alternatively, it contends that Wolfson had no authority to orally modify the contract in 1974 to provide for a different hourly rate of compensation, and Old Town should not be bound by his agreements to pay.

We note, first of all, that the contract did not require a written request for additional services; it merely provided that additional services be authorized in writing. Wolfson authorized all such services when he approved the submitted change orders and the bills covering them.

W-V argued in the trial court that because under § 3-408 of the Uniform Commercial Code (§ 55-3-408, N.M.S.A., 1978) no consideration is necessary for an instrument that is given in payment of an antecedent debt, the court could not look behind the promissory notes in deciding the claim of W-V.

The UCC does provide that no consideration is needed to support a note given in payment of an antecedent debt. But a review of the decided cases under this section of the Act indicates that they follow the official comment, which also accompanies our statute, and accept that this provision was enacted "to change the result of decisions holding that where no extension of time or other concession is given by the creditor the new obligation fails for lack of legal consideration. It is also intended to mean that an instrument given for more or less than the amount of a liquidated obligation does not fail by reason of the common law rule that an obligation for a lesser liquidated amount cannot be consideration for the surrender of the greater." This commentary makes it clear that the consideration under discussion refers to a new quid pro quo between transferor and transferee of the negotiable instrument. There need be none at all from the person to whom the instrument is given to permit substitution of a note instead of cash from his debtor. The terms of the note then become the debtor's obligation. But when the debtor and payee are the immediate parties in the lawsuit, and the debtor contests payment of the note on grounds that the underlying debt does not exist in whole or in part, or came about through fraud in the inducement or, as here, because the debtor's agent exceeded his authority in a manner known to the creditor-payee, then the debtor may attack payment demanded on the instrument by showing that the creditor is not a holder in due course and is subject to defenses available against one who is not a holder in due course, such as taking without value, with notice of defenses, or in bad faith. See, Community Bank v. Ell, 278 Or. 417, 564 P.2d 685 (1977); Estate of Wetmore, 36 Ill.App.3d 96, 343 N.E.2d 224 (1976); Mecham v. United Bank of Arizona, 107 Ariz. 437, 489 P.2d 247 (1971); Greenberg v. Morris, 436 S.W.2d 734 (Mo.1968).

Unfortunately, counsel on appeal (who was not counsel for Old Town at trial) failed to point out any evidence other than six answers given by Mr. Varsa, not favorable to appellant's theories, in the 141 pages of appellee's testimony; and although we have undertaken the arduous task of reading the entire record and the voluminous exhibits accompanying it, we are unable to find a single word supporting Old Town's contentions that Wolfson was without authority to approve the change orders and requests for payment submitted by W-V; without authority to modify the contract; without authority to execute the promissory notes; nor that W-V, by failure of value, good faith, or lack of notice of defenses against the notes, was not a holder in due course.

We affirm the trial court for three reasons: (1) Old Town offered no witnesses nor evidence to prove that the "additional services" for which W-V billed actually were "basic services" required under the architectural contract. Wolfson's deposition was received in evidence; in it he testified that all of W-V's change order billings covered additional services. Varsa, one of the partners of W-V, was the only witness called at trial and, as should have been expected, he corroborated his firm's billing as proper charges for additional services. Old Town did not produce an expert or any other witness to analyze the change orders or contradict the witnesses' categorization of the work as additional services rendered under the change orders. In the absence of any evidence in the trial court, appellant's theory of improper charges cannot be considered on appeal, Laguna Dev. Co. v. McAlester Fuel Co., 91 N.M. 244, 572 P.2d 1252 (1977). A party cannot assert an affirmative defense and expect relief thereon without presenting any evidence on the matter, Wallace v. Wanek, 81 N.M. 478, 468 P.2d 879 (Ct.App.1970).

( 2) Wolfson testified that as president of Lobo Hijo and general partner of Freeway, he had authority to manage the contract for construction, and the limited partnership agreement attached to his deposition bore out that testimony. The general partner was given "control over the daily business of the limited partnership" to the exclusion of the limited partners, and he was endowed with broad powers to complete the project, hire contractors, borrow money, and exercise all the powers of a general partner under the New Mexico Uniform Partnership and Limited Partnership Acts. There was no evidence produced by Old Town that might have shown that Wolfson violated any of his contractual or fiduciary duties to his limited partners, or that he acted beyond his authority. A defendant has an obligation to present evidence on his theories of defense. Laguna, supra.

( 3) In the absence of any restriction on Wolfson's powers to represent Old Town, and even though the contract required all modifications to be in writing, it is the general rule that, in the absence of a prohibiting statute, a written contract may be orally modified by the parties who made the original agreement, Canada v. Allstate Ins. Co., 411 F.2d 517 (5th Cir. 1969); and, even if within the statute of frauds, it is enforceable if adherence to the original agreement "would be unjust in view of a material change in position in reliance on the subsequent agreement." Restatement (Second) of Contracts, § 224 (Tent.Draft 1973). Our Supreme Court, although not ruling directly on the question, has indicated in Mercury Gas and Oil Corp. v. Rincon Oil and Gas Corp., 79 N.M. 537, 445 P.2d...