Cardinal State Bank, Nat. Ass'n v. Crook

• Decision Date: 29 November 1990
• Docket Number: No. 19486,19486
• Citation: 399 S.E.2d 863,184 W.Va. 152
• Court: West Virginia Supreme Court
• Parties: CARDINAL STATE BANK, NATIONAL ASSOCIATION v. Kenneth M. CROOK and Mildred Crook Taylor.

Page 863

399 S.E.2d 863

184 W.Va. 152

CARDINAL STATE BANK, NATIONAL ASSOCIATION v. Kenneth M. CROOK and Mildred Crook Taylor.

No. 19486.

Supreme Court of Appeals of

West Virginia.

Nov. 29, 1990.

Syllabus by the Court

1. "Extrinsic evidence of statements and declarations of the parties to an unambiguous written contract occurring contemporaneously with or prior to its execution is inadmissible to contradict, add to, detract from, vary or explain the terms of such contract, in the absence of a showing of illegality, fraud, duress, mistake or insufficiency of consideration." Syllabus Point 1, Kanawha Banking and Trust Co. v. Gilbert, 131 W.Va. 88, 46 S.E.2d 225 (1947).

2. "Allegations of fraud, when denied by proper pleading, must be established by clear and convincing proof." Syllabus Point 5, Calhoun County Bank v. Ellison, 133 W.Va. 9, 54 S.E.2d 182 (1949).

3. "The essential elements in an action for fraud are: '(1) that the act claimed to be fraudulent was the act of the defendant or induced by him; (2) that it was material and false; that plaintiff relied upon it and was justified under the circumstances in relying upon it; and (3) that he was damaged because he relied upon it.' Horton v. Tyree, 104 W.Va. 238, 242, 139 S.E. 737 (1927)." Syllabus Point 1, Lengyel v. Lint, 167 W.Va. 272, 280 S.E.2d 66 (1981).

4. " 'Upon a motion to direct a verdict for the defendant, every reasonable and legitimate inference fairly arising from the testimony, when considered in its entirety, must be indulged in favorably to plaintiff; and the court must assume as true those facts which the jury may properly find under the evidence.' Syllabus, Nichols v. Raleigh-Wyoming Coal Co., 112 W.Va. 85, 163 S.E. 767." Syllabus Point 1, Jenkins v. Chatterton, 143 W.Va. 250, 100 S.E.2d 808 (1957).

Lee H. Adler, Beckley, for Kenneth M. Crook and Mildred Crook Taylor.

David T. Kennedy, Kennedy, Vaughan & Patterson, Beckley, for Cardinal State Bank, National Ass'n.

PER CURIAM:

Cardinal State Bank instituted suit against Kenneth M. Crook and his mother, Mildred Crook Taylor (hereinafter collectively, the Crooks) on an $86,000 note that was part of the Bank's financing of Crooks' purchase of a grocery store. The circuit court, citing the parol evidence rule, barred the Crooks from presenting evidence about the circumstances of the note and directed a verdict in favor of the Bank in the note's outstanding balance. On appeal, the Crooks allege that the Bank fraudulently induced them to sign a short-term note. We find that the jury should have determined the factual question concerning the alleged fraud and, therefore, we reverse the circuit court and remand the case for further proceedings.

Because the previous owner of the grocery store defaulted on a joint participation loan from the Bank and the Small Business Administration (SBA), the Bank and SBA decided to foreclose. ¹ Before the foreclosure sale, Mr. Crook became interested in buying the store and allegedly conditioned his purchase upon the Bank's requiring no down payment and providing affordable monthly payments. By letter dated March 1, 1984, Mr. Crook submitted a $180,000 offer for the store, "subject to proper financing."

William Loving, Jr., the Bank's vice-president, testified that on March 8, 1984, the day before the foreclosure sale, he telephoned Mr. Crook to inform him that the Bank had rejected his offer and to ask if Mr. Crook wanted to bid at the foreclosure sale. Mr. Loving maintains that he explained the procedures and terms of the public auction to Mr. Crook and also indicated that long-term financing of the store might be available from the SBA. Because Mr. Crook indicated that he wanted to bid at the auction, Mr. Loving, by telephone poll of the Bank's loan committee, arranged a $70,000 letter of credit to finance the down payment. Mr. Loving, again, telephoned Mr. Crook and told him that financing for his bid was arranged.

Although Mr. Crook agrees that on March 8, 1984, he received two telephone calls from Mr. Loving and was informed of the public auction procedures, Mr. Crook maintains that he was not informed of the Bank's refusal to provide long-term financing. Mr. Crook testified that Mr. Loving told him that "everything was go" because the loan committee was "willing to go along with me and finance a package for this store." Mr. Crook understood from the telephone conversations that the Bank's financing would be long-term.

On March 9, 1984, Mr. Crook's bid of $186,000 was accepted. ² The bid included $151,000 for the real property and $35,000 for the fixtures and equipment. Mr. Crook was given immediate possession and invested about $20,000 to open the store on May 1, 1984. On May 22, 1984, the Bank presented Mr. Crook with an $86,000 lump-sum, ninety-day renewable note, for the $51,000 down payment on the real property paid to the SBA and $35,000 for the personal property. ³ The Bank sued on a renewal of the $86,000 note.

When the note was given to Mr. Crook, he immediately questioned the terms because he understood that the Bank was to provide long-term financing. Mr. Loving indicated that long-term financing might be arranged. However, because of his substantial investment in the store, Mr. Crook felt that he had "to sign anything" even though "this was not the deal we had struck."

Although the record contains extensive information about various attempts, either directly with the Bank or in conjunction with the SBA, to arrange long-term financing, for today's decision it is sufficient to note that long-term financing was not arranged. The Crooks paid interest every ninety days on the $86,000 note until they defaulted on the renewal note dated February 10, 1986. ⁴ The Bank instituted suit on the outstanding balance--about $99,000.

Mr. Crook and Mrs. Taylor allege that the Bank fraudulently enticed them into signing the note. ⁵ By pre-trial order, the circuit court, citing the parol evidence rule because the note was complete and unambiguous, excluded testimony concerning the negotiations about long-term financing that took place before the note was signed. ⁶

At trial, the record was vouched for appeal to preserve the evidence. At the close of evidence, the circuit court directed a verdict in favor of the Bank in the amount of the note, less principal paid, plus interest. ⁷ The Crooks appeal asserting that the jury should have considered the evidence because the facts showed a condition precedent and fraud, which are exceptions to the parol evidence rule.

I.

We have long recognized the general rule that parol evidence of prior or contemporaneous oral negotiations or stipulations is inadmissible to vary, contradict, add to, or explain the terms of a complete, unambiguous written instrument. In Syllabus Point 1, Kanawha Banking and Trust Co. v. Gilbert, 131 W.Va. 88, 46 S.E.2d 225 (1947), we stated the parol evidence rule as:

Extrinsic evidence of statements and declarations of the parties to an unambiguous written contract occurring contemporaneously with or prior to its execution is inadmissible to contradict, add to, detract from, vary or explain the terms of such contract, in the absence of a showing of illegality, fraud, duress, mistake or insufficiency of consideration.

Accord Syllabus Point 3, Tri-State Asphalt Products, Inc. v. McDonough Co., 182 W.Va. 757, 391 S.E.2d 907 (1990); Glenmark Assoc. v. Americare of W.Va., 179 W.Va. 632, 371 S.E.2d 353, 356 (1988); Mundy v. Arcuri, 165 W.Va. 128, 267 S.E.2d 454 (1980); Syllabus Point 1, North American Royal Coal Co. v. Mountaineer Developers, Inc., 161 W.Va. 37, 239 S.E.2d 673 (1977). The parol evidence rule also applies to notes. See Tabler v. Hoult, 110 W.Va. 542, 158 S.E. 782 (1931) (refusing to admit parol evidence of an alleged agreement that the payee was not required to pay the note); Capital City Bank v. Foster, 112 W.Va. 520, 165 S.E. 802 (1932) (refusing to admit parol evidence of an alleged contemporaneous oral agreement changing the time of payment); West Virginia Mack Sales Co. v. Brown, 139 W.Va. 667, 81 S.E.2d 103 (1954).

However, we have recognized "the general rule that parol evidence is admissible to show conditions precedent which relate to the delivery or the taking effect of a written instrument." Hamon v. Akers, 159 W.Va. 396, 222 S.E.2d 822 (1976) (quoting 30 Am.Jur.2d Evidence § 1038); Weirton Savings and Loan Co. v. Cortez, 157 W.Va. 691, 203 S.E.2d 468 (1974); Miners' and Merchants' Bank v. Gidley, 150 W.Va. 229, 144 S.E.2d 711 (1965). In Hamon, the parties agreed that there would be no conveyance without the release of a particular deed of trust. We held that the evidence demonstrated a condition precedent and allowed the admission of parol evidence. Hamon supra 159 W.Va. at 400, 222 S.E.2d at 825-26. Hamon also requires that the condition precedent not be inconsistent with the instrument. Id. 159 W.Va. at 401, 222 S.E.2d at 826; Weirton Savings, supra 157 W.Va. at 700, 203 S.E.2d at 474. "Where the alleged condition precedent is inconsistent with the written instrument, parol evidence thereof is inadmissible." 32A C.J.S. Evidence § 935 (1964).

In the present case the Crooks' note is inconsistent with the alleged condition precedent because the note clearly specifies that the payment was to be made in ninety days. Although parol evidence is admissible to show conditions precedent, the evidence of long-term financing in this case is not a condition precedent. Therefore, the Crooks must rely on their claim of fraud to have parol evidence admitted; thus, the Crooks' final issue is whether the circuit court erred in refusing to let the jury consider the evidence of fraud.

II.

Fraud, together with a showing of illegality, duress, mistake, or insufficiency of consideration are among the well recognized exceptions to the parol evidence rule. In Syllabus Point 2, Collia v. McJunkin, 178 W.Va. 158, 358 S.E.2d 242, cert. denied 484 U.S. 944, 108 S.Ct. 330, 98...