Mills v. Bonin

Parker, J.

This is an action between the payee and the maker of the five notes. No rights of third parties are involved. Tbe defendant has pleaded total failure of consideration as a defense. The rulé prohibiting the introduction of parol evidence to vary, modify or contradict the terms of a written instrument was not violated by the introduction of evidence by the defendant tending to show a total failure of consideration.

Swift & Co. v. Aydlett, 192 N.C. 330 , 135 S.E. 141 ;

Chemical Co. v. Griffin, 202 N.C. 812 , 164 S.E. 577 ;

Galloway v. Thrash, 207 N.C. 165 , 176 S.E. 303 ;

Royster v. Hancock, 235 N.C. 110 , 69 S.E. 2d 29 .

Tbe notes sued upon are under seal, which purports a consideration, but such presumption is rebuttable.

Patterson v. Fuller, 203 N.C. 788 , *502 167 S.E. 74 ;

Lentz v. Johnson & Sons, Inc., 207 N.C. 614 , 178 S.E. 226 ;

Royster v. Hancock, supra.

G-.S. 25-33 provides that absence or failure of consideration is matter of defense to a negotiable instrument as “against any person not a holder in due course . . .”

It is the general rule in this jurisdiction, and elsewhere, that a total failure of the consideration for a note under seal renders it unenforceable in the hands of any person other than a holder in due course.

Jewelry Co. v. Stanfield, 183 N.C. 10 , 110 S.E. 585 ;

Swift v. Etheridge, 190 N.C. 162 , 129 S.E. 453 ;

Patterson v. Fuller, supra; Perry v. Trust Co., 226 N.C. 667 , 40 S.E. 2d 116 ;

Royster v. Hancock, supra;

10 C.J.S., Bills and Notes, p. 626.

As a general rule the term consideration, as affecting the enforceability of contracts, consists of some benefit or advantage to the promissor, or of some loss or detriment to the promisee.

Cherokee County v. Meroney, 173 N.C. 653 , 92 S.E. 616 ;

Exum v. Lynch, 188 N.C. 392 , 125 S.E. 15 ;

Stonestreet v. Oil Co., 226 N.C. 261 , 37 S.E. 2d 676 .

The defense of absence or failure of consideration may be made to an action on notes given for the purchase price of property. 7 Am. Jur., Bills and Notes, p. 950, where numerous cases are cited.

We said in Fair v. Shelton, 128 N.C. 105 , 38 S.E. 290 : “To render a promise void upon an entire failure of consideration, it must appear that the consideration upon which it was supposed to be based, did not in fact exist, and its nonexistence was unknown to the parties. For instance, where the grantor sells and conveys land to which he has no title (both parties assuming that he has) the grantee gets nothing — there is a failure of consideration, but otherwise should the grantee purchase such right, title and interest as grantor might have, for here the maxim of caveat emptor applies.

Foy v. Haughton, 85 N.C. 168 .” . (This is a case of quitclaim deed — parenthesis ours.) “Likewise if a vendee gets that which he buys, though worthless (in the absence of deceit), for he buys upon his own judgment and at his own risk, in not requiring a warranty. So also in the absence of fraud, the buyer is liable for the price agreed to be paid for worthless stock in a corporation, where he receives that for which he contracted, though it was known by the seller to be worthless.” See also Johnston v. Smith, 86 N.C. 498 .

“While some decisions appear to have reached a contrary conclusion, it is often held that a sale or transfer of property does not constitute consideration for an undertaking on a bill or note if the seller or transferor completely lacks title to the thing sold or transferred, except where the sale is intended to be merely of such title as the seller has, if any.” (For instance a quitclaim deed, 8 C.J., p. 227 — parenthesis ours.) 10 C.J.S., *503 Bills and Notes, p. 614. See also Williston on Contracts Eev. Ed. Secs. 1570 et seq.;

Anno. 1 A.L.E. 2d, p. 37, Sec. 16, p. 52, Sec. 19.

In tbe case under consideration tbe defendant’s evidence tended to show tbat tbe defendant agreed to buy tbe plaintiff’s interest in tbe partnership for a sum equal to tbe value of tbe net worth of tbe plaintiff’s interest ; tbat tbe plaintiff managed tbe business entirely; tbat tbe defendant was not familiar witb tbe condition of tbe business, relying completely upon wbat tbe plaintiff told bim of its condition; tbat it was mutually agreed between tbe parties tbat an auditor should be employed to show wbat tbe net worth of tbe plaintiff’s interest was; tbat this audit by mistake showed tbe net worth of plaintiff’s interest was $7,000.00 or $9,000.00 and tbat the parties by negotiation reduced tbe amount to $6,800.00. Tbat tbe defendant then paid to plaintiff $800.00 in cash, and executed and delivered to bim $6,000.00 in promissory notes, and tbe plaintiff executed to tbe defendant a bill of sale for bis interest in tbe business. Tbe defendant’s evidence further tended to show tbat about 15 days after tbe execution of tbe notes and bill of sale tbe defendant’s attention was called to tbe mistake in tbe first audit, and tbat be bad another audit made which disclosed tbat tbe liabilities of tbe business exceeded its assets, and tbat the plaintiff bad no net worth in tbe business, tbat be bad nothing to convey; tbat tbe supposed consideration for tbe $800.00 in cash and tbe six promissory notes did not in fact exist.

Tbat before tbe defendant learned this be bad paid the plaintiff one promissory note for $1,000.00.

Tbe plaintiff contends tbat tbe evidence tends to show there was no total failure of consideration.

We are of tbe opinion tbat tbe defendant’s defense of a total failure of consideration should have been submitted to tbe jury upon proper instructions, and tbat tbe peremptory charge of tbe court was error.

Jewelry Co. v. Stanfield, supra; Perry v. Trust Co., supra; Finance Co. v. O’Daniel, 237 N.C. 286 , 74 S.E. 2d 717 .

If, upon a new trial, tbe jury should find there was a total failure of consideration, tbe defendant will be entitled to recover from tbe plaintiff tbe $1,800.00 be paid bim upon tbe plain principle of justice tbat tbe defendant through ignorance of tbe facts paid tbe plaintiff $1,800.00 for nothing.

Anderson v. Hawkins, 10 N.C. 568 ;

Page v. Einstein, 52 N.C. 147 ; 48 C.J., Payment, p. 768 (where numerous cases are cited) ; 70 O.J.S., Payment, Sec. 158; 40 Am. Jur., Payment, Sec. 214. In stating this conclusion we must not be understood as expressing any opinion as to tbe weight or conclusiveness of the evidence for tbat is the province of tbe jury. G.S. 1-180.

Tbe defendant’s assignment of error to tbe lower court’s dismissing bis claim for tbe recovery of tbe $1,800.00 be paid tbe plaintiff is sustained.

*504 The defendant is entitled to a New Trial, and it is so ordered.

New Trial.

Bobbitt, J., took no part in the consideration or decision of this case.