FIRST NAT. BANK v. HANCOCK

FIRST NAT. BANK v. HANCOCK
1926 OK 906
250 P. 908
120 Okla. 177
Case Number: 17389
Decided: 11/16/1926
Supreme Court of Oklahoma

FIRST NAT. BANK
v.
HANCOCK.

Syllabus

¶0 Bills and Notes--Failure to Forbear as Failure of Consideration. The consideration for a promissory note may be the detriment which the promisee suffers, or the promisee's forbearance of some legal right which he otherwise would be entitled to exercise. Refusal of the promisee to suffer the detriment so agreed to be borne, or to forbear such legal right, may constitute failure of consideration for the giving of the note.

Monk & McSherry, for plaintiff in error.
Kent v. Gay, for defendant in error.

ESTES, C.

¶1 Parties appear in the same order as in the trial court. Plaintiff sued Hancock on a promissory note for nearly $ 4,000. Judgment was for defendant on verdict from which the plaintiff appeals. Defendant admitted the execution of the note, and pleaded failure of consideration. The only question presented is whether the evidence reasonably tends to support the verdict on said issue. Defendant was engaged in the business of buying and selling cotton in 1921. He deposited $ 15,000 in plaintiff bank as a margin, and purchased about 700 bales of cotton at about 20 cents per pound, delivering to the bank a ticket or muniment of title for each bale attached to his check, the bank receiving such tickets and paying the checks. The only testimony upon the issue of consideration is that of defendant Hancock, which is uncontradicted. He testified that the following conversation with the vice-president of plaintiff bank took place on December 15, 1921:

"Q. What did he say to you with regard to this cotton at that time? A. He said the cotton was going down and my margin had become exhausted, and I would have to give them security to protect them in the carrying of this cotton. Q. Did he say what would be done with the cotton if you didn't do that? A. He would be compelled to sell it, or he would sell it."

¶2 Defendant further testified that at that time cotton was about 15 cents, and that the bank authorities stated that defendant would have to give them a note, or something that they could carry on their books and offset the depreciation, and that thereupon defendant did execute and deliver to the bank, the note in controversy on the condition "that the cotton would not be sold without my permission"; that no time was specified, except a reasonable length of time for holding the cotton or forbearing to sell the same without the consent of defendant; that in a very short time, without the consent of defendant Hancock, the bank did sell the cotton; and that several months thereafter cotton attained the price of 21 cents. Again, in response to a question by the court, defendant stated that the agreement upon which he gave the note was that "they would carry this cotton and not sell it without my permission." In submitting the cause to the jury, the court stated that it was the contention of defendant that the bank notified him that said margin had been exhausted by the decline in the price of cotton, and that it was necessary for him to place an additional margin in the bank in order to protect it against further loss; that if plaintiff would execute said note, the bank would not sell the cotton without defendant's consent for a reasonable length of time, and that the bank had violated this agreement upon which the note was given, and that therefore the consideration had failed. The court further instructed that a valuable consideration was necessary to the validity of the note, and that it might consist of money or a forbearance, and if the jury found from the evidence that the bank sold the cotton without the consent of defendant, and without waiting a reasonable time, this might constitute failure of consideration. The court further instructed on the law of reasonable time, and if the jury found that there was no such agreement to forbear until defendant gave his consent, the bank had the right to sell the cotton at any time, and that defendant would be liable on the note, in that event, for the loss the bank sustained.

¶3 A definition of "consideration" is found in 13 C. J. 311: