Lloyds Credit Corp. v. Marlin Management

 NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
 order that corrections may be made before this opinion goes to press.

                                 No. 90-311


 Lloyd's Credit Corporation                   Supreme Court

                                              On Appeal from
      v.                                      Chittenden Superior Court

 Marlin Management Services, Inc.             December Term, 1991


 Silvio T. Valente, J.


 David Watts of Blodgett, Watts & Volk, Burlington, for plaintiff-appellant

 Patricia L. Rickard and Michael B. Rosenberg of Miller, Eggleston &
   Rosenberg, Ltd., Burlington, for defendant-appellee



 PRESENT:  Gibson, Dooley and Johnson, JJ., and Peck, J. (Ret.), Specially
           Assigned


      JOHNSON, J.   Plaintiff Lloyd's Credit Corporation appeals from a
 superior court order holding that a check, written by defendant Marlin
 Management Services, Inc., and endorsed to Lloyd's Credit by its wholly
 owned subsidiary, Hansman McAvoy Co, Inc., was not supported by
 consideration.  We hold that there was consideration and reverse.
      In September 1983, Air Vermont, Inc., purchased aircraft flight and
 liability insurance from Hansman McAvoy, an insurance agent and broker.
 Lloyd's Credit advanced Hansman McAvoy the money for Air Vermont's
 insurance premiums.  Air Vermont executed a financing agreement promising to
 pay Hansman McAvoy the money advanced for the premiums, and Hansman McAvoy
 assigned the financing agreement to Lloyd's Credit.  Under the agreement,
 Lloyd's Credit had the right to cancel the insurance policy at any time for
 default and, if cancelled, to receive all of the unearned premiums under the
 policy.
      In January of 1984, Hansman McAvoy notified Air Vermont that the
 insurance coverage on the airline was going to be cancelled for nonpayment
 of the amount due under the financing agreement.  Without flight insurance,
 Air Vermont would lose its federal license to fly commercially and would be
 forced to cease operations.  Air Vermont's managers met to discuss the
 airline's financial difficulties.  John F. Chapple, President of Marlin
 Management, a group considering investing in Air Vermont, was present at the
 meeting.  Chapple provided Air Vermont with ten pre-signed blank checks,
 drawn on a Marlin account.  Air Vermont was to use one check to pay the
 delinquent insurance payment and the other checks in case of other emer-
 gencies, so that the airline could continue operating while Marlin
 investigated the viability of investing in Air Vermont.  On January 26,
 1984, one of the pre-signed checks was issued to Hansman McAvoy to pay the
 delinquent insurance balance of $16,473.  Hansman McAvoy endorsed the check
 to Lloyd's Credit, which deposited the check.
      During the last weekend of January 1984, Chapple met with officers of
 Air Vermont to discuss further the airline's financial difficulties.  At
 this meeting, a decision was made that Air Vermont should file for bank-
 ruptcy, which was done on Monday, January 30, 1984.  The bankruptcy court
 issued a stay prohibiting cancellation of the insurance policy; the stay
 remained in effect until May 11, 1984.
      On the morning of the bankruptcy filing, Chapple stopped payment on the
 $16,473 check.  The check was returned unpaid to Lloyd's Credit.  Lloyd's
 Credit brought this action against Marlin for payment of the check.
      The trial court dismissed the case on the merits.  It concluded that
 the check was not a negotiable instrument because it lacked words of negoti-
 ability, such as "pay to the order of" or "pay to bearer."  9A V.S.A. { 3-
 104(1).  Consequently, Lloyd's Credit could not be a holder in due course of
 the check, 9A V.S.A. { 3-805, and took the check subject to a defense of
 failure of consideration.  9A V.S.A. { 3-306(c); Quazzo v. Quazzo, 136 Vt.
 107, 112, 386 A.2d 638, 641 (1978).  The court then held that Lloyd's Credit
 was not entitled to payment because Marlin received no consideration for the
 check.
      Lloyd's Credit raises four issues on appeal:  (1) whether Marlin
 received or Lloyd's Credit gave consideration for the check, (2) whether
 Marlin was estopped from raising the defense of failure of consideration,
 (3) whether there was sufficient evidence to support a finding that Air
 Vermont's insurance would have been cancelled prior to its bankruptcy if
 the check had not been issued, and (4) whether Lloyd's Credit was a holder
 in due course of the check and thus entitled to payment even without
 consideration.  Because we reverse the court's finding of lack of
 consideration and hold that Lloyd's Credit is entitled to payment of the
 check from Marlin, we need not reach the other issues.
      Marlin argues that there was no consideration for the check because
 Lloyd's Credit suffered no detriment and Marlin received no benefit in the
 transaction.  It points to two key trial court findings that it contends
 support its position.  First, the court stated that, on the evidence
 presented, it could not find
         that had Lloyd's Credit Corporation not received the
         check in question on January 26, 1984 that it would have
         cancelled Air Vermont's insurance policy prior to the
         date that Air Vermont filed bankruptcy, which was on
         January 30, 1984.

      It further found that
           although John Chapple expected [Marlin] to receive some
           benefit from its infusion of money into Air Vermont,
           Inc., no evidence was presented and the Court cannot
           find what immediate benefits [Marlin] received.  At the
           time, [Marlin] had taken no equity position in Air
           Vermont, Inc.

 On the basis of these facts, the court concluded, without further
 explanation, that Marlin received no consideration in exchange for the
 check.  Marlin asserts that we should apply a clearly erroneous standard to
 the court's findings and conclusions and affirm.  That standard, however,
 does not apply to the court's conclusion that consideration did not exist.
      Whether there is consideration for a contract is a question of law, not
 fact.  See, e.g., Gulden v. Sloan, 311 N.W.2d 568, 572 (N.D. 1981); Hargrave
 v. Canadian Valley Electric Coop., 792 P.2d 50, 56 (Okla. 1990); Pierce v.
 Plogger, 223 Va. 116, 120, 286 S.E.2d 207, 210 (1982).  Either a benefit to
 the promisor or a detriment to the promisee is sufficient consideration for
 a contract.  Howard National Bank v. Newman, 115 Vt. 61, 69, 50 A.2d 896,
 901 (1947).  Even assuming the trial court's findings are not clearly
 erroneous, the issue remains whether, as a matter of law, they support a
 conclusion that there was no consideration.  We hold that the court's
 findings show consideration, manifested by both a detriment to Lloyd's
 Credit and a benefit to Marlin.
      The first finding -- that even if Lloyd's Credit had not received a
 check from Marlin on January 26, 1984, it would not have cancelled Air
 Vermont's insurance before January 30, 1984  -- is irrelevant to whether
 consideration existed.  Consideration must be evaluated at the time the
 contract was made.  See Farmer v. Farmer, 720 P.2d 174, 177 (Colo. Ct. App.
 1986); Bayshore Royal Co. v. Doran Jason Co., 480 So. 2d 651, 653 (Fla.
 Dist. Ct. App. 1985).
      According to the court's findings, in January 1984, Lloyd's Credit had
 the right to cancel Air Vermont's insurance and receive all unearned
 premiums if the airline defaulted on its payments.  Air Vermont was notified
 that the policy was going to be cancelled for nonpayment.  On January 26,
 1984, Marlin issued a check for $16,473 to Hansman McAvoy, which endorsed
 it to Lloyd's Credit.  The contract came into existence at that time.  By
 writing the check, Marlin promised to pay the money due for insurance in
 exchange for Lloyd's Credit's forbearance in cancelling the insurance.  At
 the time the contract was made, Lloyd's Credit acted to its detriment by
 giving up the right to cancel the policy.  See 1 Williston on Contracts {
 102A, at 382 (3d ed. 1957) ("legal detriment" is not the same as detriment
 in fact; rather, it means "giving up something which immediately prior
 thereto the promisee was privileged to retain").  Whether Lloyd's Credit
 would gratuitously have chosen not to exercise its right to cancel even
 without Marlin's check is irrelevant to whether consideration existed at the
 time the contract was made.
      The second finding cited by Marlin -- that Marlin received no
 "immediate benefits" from its actions -- is likewise irrelevant to the issue
 of consideration.  Nothing in contract law suggests that the promisor must
 benefit immediately.  To the contrary, a "mere expectation or hope of
 benefits is sufficient" to serve as consideration.  Affiliated Enterprises
 v. Waller, 40 Del. 28, 36, 5 A.2d 257, 260 (1939); see also, Travelers
 Insurance Co. v. Gebo, 106 Vt. 155, 163, 170 A. 917, 920 (1934) (husband's
 expectation that wife would continue to support him and pay expenses related
 to his illness was consideration supporting his promise to repay her by
 naming her as beneficiary of his life insurance policy).
      The definition of a benefit is extremely broad.  Simply put, the
 promisor must receive something desired for his or her own advantage.  1
 Williston, supra, { 102A, at 382; see also Omaha National Bank v. Goddard
 Realty, Inc., 210 Neb. 604, 609, 316 N.W.2d 306, 310 (1982) (consideration
 is sufficient if promisor perceives it as valuable).  Even in commercial
 transactions, consideration can exist without economic benefit or
 advantage; a benefit need not be measurable in money.  1 Corbin on Contracts
 { 121, at 519 (1963).  The extent of a benefit is not important; a "very
 slight advantage" is sufficient to constitute consideration.  Brewer v.
 First National Bank of Danville, 202 Va. 807, 815, 120 S.E.2d 273, 279
 (1961).
      Here, the court found that, "at the time Mr. Chapple turned over the
 checks to Air Vermont, Inc., he and several others investors were investi-
 gating the airline to determine whether they would get involved in the
 ailing company hoping for future profits."  That Marlin anticipated future
 benefits in exchange for the initial investment in Air Vermont was supported
 by uncontroverted evidence.  Chapple testified that at the time he made the
 investment his intention was "to put Marlin Management in a position to
 explore the possibility of investing substantially in Air Vermont."
 Although he was vague and evasive about his current and anticipated roles in
 the airline, in response to the question, "But the plan was to invest money
 for financial return to you?", he answered unequivocally, "Absolutely."
      Marlin received benefits from both Lloyd's Credit and Air Vermont.
 See Quazzo, 136 Vt. at 112, 386 A.2d  at 641 (consideration may be given by
 third party instead of promisee); see also Restatement (Second) of Contracts
 { 71 comment e (1981) ("It matters not from whom the consideration moves or
 to whom it goes.  If it is bargained for and given in exchange for the
 promise, the promise is not gratuitous.").  As a potential investor in Air
 Vermont, Marlin wanted the airline to remain a viable business.  Without
 insurance, Air Vermont could not operate, and its value would surely
 deteriorate.  Lloyd's Credit gave Marlin the means of keeping the airline
 aloft while negotiating for some financial or ownership interest in it.  Air
 Vermont gave Chapple permission to attend meetings at which the financial
 condition of the airline was discussed and to take part in decision-making
 about the company's future.  Paying the airline's insurance premium was not
 a charitable act; it gave Marlin a foothold in the company which it hoped to
 translate into future profits.
      That Air Vermont was unable to work out its financial problems and
 instead filed for bankruptcy does not render the consideration Marlin
 received worthless.  Once consideration has been found, "courts have
 traditionally declined to relieve a party from the terms of the bargain
 merely because he made what he regards as a bad or uneven bargain."  Hancock
 Bank and Trust Co. v. Shell Oil Co., 365 Mass. 629, 629, 309 N.E.2d 482, 483
 (1974); see also, Hyde v. Shapiro, 216 Neb. 785, 789, 346 N.W.2d 241, 244
 (1984) (agreement made between two sophisticated parties will not be set
 aside because the consideration ultimately does not prove to be a benefit to
 the promisor).
      Marlin was in the business of providing management services and making
 investments.  It was an experienced commercial player seeking to advance
 its interests by saving Air Vermont.  It took a risk that did not reap the
 rewards it had hoped for, but it should not, on that account, be relieved
 from its obligation to pay Lloyd's Credit.  As a commercial contract,
 Marlin's check to Hansman McAvoy, endorsed to Lloyd's Credit, is
 presumptively valid, H.P. Hood & Sons v. Heins, 124 Vt. 331, 336, 205 A.2d 561, 564 (1964), and nothing in the trial court's findings convinces us that
 the check lacked consideration.
      Reversed and remanded for entry of judgment for plaintiff.
                                    FOR THE COURT:



                                    _________________________________
                                    Associate Justice