Burke v. Dulaney

• Decision Date: 23 April 1894
• Docket Number: No. 326,326
• Citation: 14 S.Ct. 816,38 L.Ed. 698,153 U.S. 228
• Parties: BURKE v. DULANEY et al
• Court: U.S. Supreme Court

153 U.S. 228

14 S.Ct. 816

38 L.Ed. 698

BURKE

v DULANEY et al.

No. 326.

April 23, 1894.

This was an action in the district court of Shoshone county, Idaho, by H. Grafton Dulaney against John M. Burke on a promissory note. Plaintiff having died, his executors, Richard H. Dulaney and John Southgage Lemmon, were substituted as parties. The case was tried to the court without a jury, and judgment rendered for plaintiff. Defendant appealed to the supreme court of the state, where the judgment was affirmed (23 Pac. 915). Defendant then appealed to this court.

This action was brought by the testator of the appellees, upon a writing purporting to be the promissory note of the appellant for $4,308.80, dated Salt Lake City, Utah, August 10, 1883, and payable one year after date, for value received, at the bank of Wells, Fargo & Co. in that city, with interest at the rate of 6 per cent. per annum from date until paid.

The defendant, Burke, denied his liability upon the note, and at the trial below was sworn as a witness on his own behalf. In support of his defense, as set forth in the answer filed by him, he stated the circumstances under which the note was given. He said: 'Mr. Dulaney bought this group of mines,—the Live Yankee and the Mary Ellen. He came to the Walker House, in Salt Lake, and wanted me to run them for him. I said I would not do it unless I got a show to get some interest in the property. He says, 'I will carry an interest for you, and you can take it if you want it, and, if not, you can give it back to me after you see the property." To this testimony the plaintiff objected, and the defendant, admitting that the agreement referred to by him was oral, the objection was sustained. To this ruling he excepted.

Being asked what he did after giving the note in suit, he answered: 'I gave the note. I worked on the property, which was done some time in September. Worked the property until March. Settled up all of its debts, paid them. Notified Dulaney I wanted nothing more to do with the property; that I was going to Idaho territory, to Coeur d'Alene mines; and as I was ready to give him a deed at any time he would send me my note. That is all.' Objection being made by the plaintiffs to this testimony, the defendant offered to prove 'that at the time of the giving of the note and prior thereto, Dulaney, the payee of the note, agreed with Mr. Burke, the maker of the note, that the note should be given to represent the price of the interest that Mr. Burke was to have, conditioned upon his demanding it after an inspection of the mining property mentioned.' He offered also to prove that, after inspecting the property and testing it, the defendand notified testator that he did not want the interest; that he was prepared to make a deed for the interest to the latter, and demanded the delivery of his note. All this evidence was excluded by the court upon motion of the plaintiffs, to which ruling the defendant excepted.

The defendant having stated that the conversation with the testator, above referred to, and which was excluded by the court, took place prior to the execution of the note, he offered to prove that at the time the note was made, the same agreement was made orally between him and the testator. This testimony was also excluded, and he excepted.

The following question was propounded to him at the trial: 'State whether or not, prior to your making the note, the plaintiff agreed with you that you could explore, work, and develop the mining claims mentioned in the answer, and, if at any time before the maturity of the said note you should desire so to do, that he would relinquish said option of purchase, that you could relinquish your said option of purchase, and that he, plaintiff, would cancel the note, and accept the deed in full discharge of the note and the cancellation thereof.' The defendant having admitted that the agreement referred to in the question was oral, the court excluded the evidence, and he excepted. The court also refused to allow him to state whether he examined, worked, and developed the mining claims mentioned in his answer, and whether he had refused to take such claim under the agreement with the plaintiff.

At the trial the defendant offered in evidence a deed executed by him to the plaintiff, conveying to the latter, in consideration of the surrender of the note in question, all his right, title, and interest in the above property,—the same deed that had been filed by the defendant with his answer. The court held this evidence to be inadmissible unless the defendant proposed to show that the plaintiff accepted the deed. To this ruling the defendant excepted. The defendant was not present when Dulaney took a deed from the owner of the mining property, nor was it ever delivered to him.

W. B. Heyburn, for appellant.

Leigh Robinson, for appellees.

[Argument of Counsel from pages 230-232 intentionally omitted] Mr. Justice HARLAN, after stating the facts in the foregoing language, delivered the opinion of the court.

The general rule that a written contract cannot be contradicted or varied by evidence of an oral agreement between the parties before or at the time of such contract has been often recognized and applied by this court, especially in cases in which it was sought to deprive bona fide holders of or parties to negotiable securities of the rights to which they were entitled according to the legal import of the terms of such instruments. Renner v. Bank, 9 Wheat, 587; Brown v. Wiley, 20 How. 442; Specht v. Howard, 16 Wall. 564; Forsyth v. Kimball, 91 U. S. 291; Brown v. Spofford, 95 U. S. 474; Martin v. Cole, 104 U. S. 30; Burnes v. Scott, 117 U. S. 582, 6 Sup. Ct. 865; Falk v. Moebs, 127 U. S. 597, 8 Sup. Ct. 1319.

Several of these cases were cited in the opinion of the court below, and have been cited here, as supporting the exclusion of the evidence with the appellant offered to introduce. 23 Pac. 915. It is supposed that Burnes v. Scott is particularly in point for the appellees. That was an action by the indorsee of a negotiable note against the maker. The defendant in that case offered to prove that the note was not intended by him or by the payee as a promissory note, but was given to and was received by the payee as a mere memorandum of the estimated value of the payee's interest in certain railroad bonds placed in the hands of the marker, and which were to be accounted for in the settlement of certain partnership affairs in which the maker and payee were interested; and that upon such settlement it would appear that the payee had received, prior to the giving of the note, more than his proper share of the partnership assets, and therefore was not entitled to claim anything in virtue of such memorandum. This court held the evidence inadmissible upon the ground that, by an alleged contemporaneous verbal agreement, it varied and contradicted the written contract of the parties. If that action had been brought by the original payee against the maker, and if the evidence above referred to had been excluded, a different question would have been presented. But, as we have seen, the issue in Burnes v. Scott was between the indorsee of a negotiable note and the maker. The rule is settled that a negotiable instrument in the hands of an innocent holder for value cannot be contradicted, to his prejudice, by evidence of an oral agreement or understanding between the original parties variant from the terms of their written contract.

The authorities cited do not determine the present case. The issue here is between the original parties to the note. And the evidence offered by the appellant, and excluded by the court, did not in any true sense contradict the terms of the writing in suit, nor vary their legal import, but tended to show that the written instrument was never, in fact, delivered as a present contract, unconditionally binding upon the obligor, according to its terms, from the time of such delivery, but was left in the hands of Dulaney, to become an absolute obligation of the maker in the event of his electing, upon examination or investigation, to take the stipulated interest in the property in question. In other words, according to the evidence offered and excluded, the written instrument, upon which this suit is based, was not—except in a named contingency—to become a contract, or a promissory note, which the payee could at any time rightfully transfer. Evidence of such an oral agreement would show that the contingency never happened, and would not be in contradiction of the writing. It would prove that there never was any concluded, binding contract entitling the party who claimed the benefit of it to enforce its stipulations. The exclusion of parol evidence of such an agreement could be justified only upon the ground that the mere possession of a written...