Citizens Savings Bank & Trust Co. v. Paradis & Sons, Ltd.,

• Decision Date: 08 May 1929
• Citation: 146 A. 3,102 Vt. 114
• Parties: CITIZENS SAVINGS BANK & TRUST CO. v. PARADIS & SONS, LTD., ET AL
• Court: Vermont Supreme Court

146 A. 3

102 Vt. 114

CITIZENS SAVINGS BANK & TRUST CO. v. PARADIS & SONS, LTD., ET AL

Supreme Court of Vermont

May 8, 1929

February Term, 1929.

Bills and Notes---Evidence---Varying Terms of Written Instrument by Parol---Consideration for Making of Accommodation Indorsement---Parol Evidence as to Consideration.

1. A negotiable instrument which expresses on its face an absolute promise to pay cannot be cut down into a conditional promise or enlarged, varied, or contradicted by evidence of a prior or contemporaneous parol agreement.

2. Testimony of accommodation indorser that he indorsed note on which he was sued in reliance upon promise of president of bank, where maker had funds which had been trusteed at time note was given, to apply money on deposit, when released from such trustee process, to payment of note, held admissible since such promise was consideration for indorsement, and when not fulfilled, consideration failed.

3. Consideration or lack of consideration for a written contract may be shown by parol, and such procedure does not contradict or vary terms of writing.

ACTION OF CONTRACT on a promissory note. Trial by court at the June Term, 1928, Caledonia County, Buttles, J., presiding. Judgment rendered against defendant Moran by default judgment for defendant Paradis & Sons, Ltd., to recover its costs. The plaintiff excepted. The opinion states the case. Affirmed.

Judgment affirmed.

Porter, Witters & Longmoore for the plaintiff.

Present: WATSON, C. J., POWERS, SLACK, MOULTON, and WILLCOX, JJ.

OPINION

MOULTON

This is an action in contract, in which the plaintiff bank seeks to recover upon a promissory note payable to its order, signed by Morin, and indorsed by J. W. Paradis, whose authority to do so was conceded, in the name of Paradis and Sons, Ltd. Judgment was entered against Morin by default, but after a trial without a jury, Paradis and Sons, Ltd. had judgment for its costs. The case is here upon exception by the plaintiff.

The trial court found the following facts: Morin had money on deposit in a checking account in the plaintiff bank. Suit was brought against him and his account was trusteed, and a number of checks previously drawn by him, were presented for payment and protested. Thereafter Morin, Paradis, and the president of the bank agreed that Morin should give the note in suit; that Paradis should indorse it in behalf of his company; that the avails of the note should be used to pay Morin's outstanding checks and other obligations; that Morin should, by giving a bond or otherwise, procure the discharge of the trustee attachment on his bank account, and that as soon as this should be done, the bank would pay the note from the funds so released. Morin procured the release of the bank account from attachment, and the bank did not pay the note therefrom, but after the maturity of the note, permitted Morin to withdraw all of the funds from the bank, by two checks, dated the same day. There was sufficient in the account to pay the note.

At the time of the execution of the note Paradis believed Morin to be financially irresponsible, and he indorsed it in reliance upon the promise of the bank as to its payment, and had it not been for that promise, he would not have done so.

Subject to objection and exception by the plaintiff, Paradis was permitted to testify as follows:

"He took me into the bank, Mr. Morin did, and introduced me to Mr. Wood (the president of plaintiff bank); and Mr. Wood told me--he says: 'Morin has a trustee on his money here, and they are liable to take his money for not having his checks paid up.' I said, 'What do you advise me to do?' Mr. Wood said, 'If you indorse a note for about a month, during that time Morin will have time to have the money released, and as soon it is released I will take that money and pay the note with it.' I said, 'If you will do that, under those conditions I will indorse the note, but on no other condition' * * * * And that is why I did it; otherwise I would not have done it." * * * *

Q. "Did Mr. Morin tell Mr. Woods he was making any arrangements about putting up a bond and having the trustee released on the monies?" A. "Yes, sir."

Q. "Before the signing of this note, did you say anything to Mr. Woods about his looking after the payment of the note?" A. "Yes, sir."

Q. "What did you say to Mr. Woods on that point?" A. "I told him--I says--'Now it is distinctly understood that the trusteed money will have to be applied upon the note?"'

Q. "What did Mr. Woods say to that?" A. "He said, yes, that the trustee money would be used to pay the note when the trustee was off, and he was to look after it, and Mr. Morin was there and he agreed to it, too."

Q. "And, Mr. Morin then agreed that the monies should be so applied by Mr. Woods or the bank?" A. "Yes, sir."

The ground of the exception was that the evidence disclosed a parol agreement which varied the terms of the note.

It is quite true that a negotiable instrument which expresses on its face an absolute promise to pay cannot be cut down into a conditional promise, or enlarged, varied, or contradicted by evidence of a prior or contemporaneous parol agreement. Alexander v. Chevalier, 98 Vt. 230, 234, 126 A. 498; Hayden v. Hoadley, 94 Vt. 345, 348, 111 A. 343. And authorities are not wanting to the effect that a contemporaneous parol agreement that a note shall be paid out of a particular fund is not admissible in defense to an action upon the note, since the effect is to contradict and vary the terms of it. Hoyt v. French, 24 N.H.198, 202, 203; St. Louis Perpetual Ins. Co. v. Homer, 50 Mass. 39, 40, 41; Currier v. Hale, 90 Mass. 47; Tower v. Richardson, 88 Mass. 351, 352; Adams, Admx. v. Wilson, 53 Mass. 138, 142, 45 Am. Dec. 240; Murchie v. Peck, 160 Ill. 175, 43 N.E. 356, 357; Gridley v. Dole, 4 N.Y. 486, 491; Eaves v. Henderson, 17 Wend. 190, 191, 192; Earle v. Enos (C. C.), 130 F. 467, 470; Avery v. Crux, L. R. 5 C. P. 37, 4 E. R. C. 195.

But Mr. Wigmore, while recognizing that an extrinsic agreement as to the mode of payment must be ineffective, since the parties have expressly dealt with this matter in the instrument, points out that an agreement to concede a credit or counter claim, as offsetting the obligation of the instrument, would be a separate transaction and therefore valid; although he says that the distinction between the two may sometimes be hard to draw. 5 Wigmore, Evidence, 2nd ed., par. 2444.

However, this distinction need not be drawn here. The ruling is to be upheld, upon another ground.

Paradis was an accommodation indorser. The evidence received under exception showed that he indorsed the note in reliance upon the promise of the president of the bank (whose authority to bind the bank in this way is not questioned), to apply the money on deposit when released from the trustee process, to its payment. This promise was the consideration for the indorsement; and since it was not fulfilled,...