Dulaney v. Burke

• Decision Date: 06 March 1890
• Parties: DULANEY v. BURKE
• Court: Idaho Supreme Court

23 P. 915

2 Idaho 719

DULANEY v. BURKE

Supreme Court of Idaho

March 6, 1890

PROMISSORY NOTE-AGREEMENT TO CANCEL-PAROL EVIDENCE.-D. purchased mining property, deeded one-sixth interest to B. B. executed and delivered to D. his note due one year after date for $4,308.80, his share of the purchase price. At the same time D. orally agreed that at any time before maturity of the note he would accept from B. a reconveyance of his interest and cancel the note. In a suit for the collection of the note B set up the oral agreement as a defense; held, that as such oral agreement tended to establish a contract different in form, purpose and effect from the written contract, and not based on want of consideration, fraud or mistake, the said oral agreement was inadmissible as evidence to vary the terms of the note or defeat it.

APPEAL from District Court, Shoshone County.

Affirmed.

Woods &amp Heyburn, for Appellant.

The conveyance of the mining property to the defendant was not intended as a sale, but was made by the plaintiff for a certain purpose of his own, and upon an understanding with the defendant that the land was afterward to be conveyed back in the event of certain contingencies, and that the note was given at the time under an agreement that it was not to be paid. This fact was sought to be proven by the defendant, and the court below refused to admit the evidence. The answer raises this defense squarely, and in law it was a good defense, and the refusal to receive the evidence was error. (Schindler v. Muhlheiser, 45 Conn. 153; McFarland v. Sikes, 54 Conn. 250, 1 Am. St. Rep. 111, 7 A. 408; Benton v. Martin, 52 N.Y. 570; Kennedy v. Goodman, 14 Neb. 585, 16 N.W. 834; Maltz v. Fletcher, 52 Mich. 484, 18 N.W. 228; Colman v. Post, 10 Mich. 422, 82 Am. Dec. 49; Catlin v. Birchard, 13 Mich. 110; Bowker v. Johnson, 17 Mich. 46; Clarke v. Tappin, 32 Conn. 66; Dicken v. Morgan, 54 Iowa 684, 7 N.W. 145.)

Albert Hagan and Frank Ganahl, for Respondent.

In an action upon a note which is absolute upon its face, no evidence can be produced by parol that it should only be paid on a certain contingency. (Swank v. Nichols, 24 Ind. 199; Schurmeier v. Johnson, 10 Minn. 319 (Gill. 250); Foy v. Blackstone, 31 Ill. 538, 83 Am. Dec. 246; Myers v. Sunderland, 4 G. Greene, 567; Cunningham v. Wardwell, 12 Me. 466; Boody v. McKenney, 23 Me. 517.) A verbal contract made at the time a promissory note is executed, varying the terms of the note, cannot be set up to defeat a suit on the note. (Calhoun v. Davis, 2 Ind. 532; Foy v. Blackstone, 31 Ill. 538, 83 Am. Dec. 246; Burge v. Dishman, 5 Blackf. 272; Mahan v. Sherman, 7 Blackf. 378; Columbia v. Amos, 5 Ind. 184; Tucker v. Talbott, 15 Ind. 115; Nill v. Comparet, 15 Ind. 243; Williams v. Beazley, 3 J. J. Marsh, 577; Cole v. Hundley, 8 Smedes & M. 473; Barton v. Wilkins, 1 Mo. 74; Anspach v. Bast, 52 Pa. St. 356; Daniel v. Ray, 1 Hill (S. C.), 32.)

SWEET, J. Beatty, C. J., concurs. BERRY, J., Dissenting.

OPINION

SWEET, J.

On August 10, 1883, at Salt Lake City, Utah, John M. Burke executed and delivered a certain promissory note in the sum of $ 4,308.80, with interest at the rate of six per cent per annum until paid, due one year after date, and payable to H. Grafton Dulaney, or order. Before the maturity of said note defendant, Burke, became a resident of Idaho territory, and on the seventh day of October, 1887, plaintiff commenced an action in the district court of Idaho territory, first judicial district, in and for Shoshone county, for the collection of said note. Defendant sets up as a defense in said action an oral agreement, made at the time of, or prior to the execution of, said note, the substance of which is as follows: "That plaintiff was about to consummate the purchase of two mining claims, and desired the defendant to become the superintendent or manager thereof. To this proposition defendant replied that he did not care to enter into such an arrangement, unless there was something in it for him. Plaintiff thereupon offered to purchase the property, giving to defendant a one-half interest therein, the defendant to execute to plaintiff his promissory note for one-half the purchase price of said property, at the same time giving to defendant an opportunity to examine and test said mining property; and further agreeing that if, after such examination, defendant did not desire to pay the note, and retain his interest in the property, he might surrender said interest to plaintiff, and that, upon surrendering this interest, plaintiff would cancel defendant's note given therefor. That, in accordance with this agreement, plaintiff purchased the property, taking a deed therefor in the names of plaintiff and defendant. That afterward defendant did examine and test the mines thus purchased, and concluded that he did not care to retain his interest in the same, and notified plaintiff that he was ready to execute a deed in favor of plaintiff to his interest in said mines whenever plaintiff would cancel said note. Wherefore, he prays judgment against plaintiff for the cancellation of said note, and for his costs," etc.

At the trial defendant offered to prove said agreement, at the same time tendering a deed to the property, and plaintiff objected to the introduction of evidence to such effect, on the ground that it was an attempt to vary the terms of a written contract by parol evidence. The offer thus made was tendered in various forms, and always met by the same objection; and this objection, for the reason above set forth, was sustained by the court. The case was tried without a jury, and the court gave judgment for plaintiff in the sum of $ 5,692.80. Defendant excepted to the ruling of the court in excluding the evidence by which it was proposed to prove the agreement before mentioned; and the ruling thus made is the error assigned upon which defendant and appellant relies to reverse the order of the court below, overruling defendant's motion for a new trial. Defendant cites Schindler v. Muhlheiser, 45 Conn. 153, as an authority in support of his interpretation of the law. Several other authorities are cited by appellant, more or less in line with the case just referred to; but unquestionably Schindler v. Muhlheiser is the strongest case presented by the appellant as tending to support his claim in the issue at bar. After stating the facts in this case, the court reaches three separate and distinct conclusions. They are as follows: "1. The note was given pursuant to, and in fulfillment of, an antecedent agreement between the parties; 2. That agreement shows that it was not given as evidence of any existing indebtedness, but as a means of accomplishing an ulterior object wholly in the interest and for the benefit of plaintiff; 3. Consequently the note was an accommodation note, the collection of which would operate as a fraud upon the defendant." We need not quote authorities to establish the principle that fraud vitiates any contract. The quotation of authorities upon this proposition is wholly unnecessary; and we repeat what has already been decided over and over by every court that ever considered the question, and what has been declared to be the law by every text-writer discussing it, that any contract may be assailed upon the charge of fraud, mistake, or failure of consideration.

We will now consider whether the case at bar comes within any of these rules, or whether it comes within the rule laid down in the case first cited. Defendant offered to prove that the agreement was made prior to the execution of the note. To this extent it bears some resemblance to the first conclusion reached by the court in Schindler v. Muhlheiser. But, after all, no contract can be executed before it is discussed in all of its forms and phases, and thoroughly understood and agreed on between the parties; and the execution of a written agreement, or contract, in accordance with such a discussion, would not be a fulfilling of an antecedent agreement. It is simply placing the agreement in writing, and thereafter the contents of the written agreement are to bear witness as to the intent of the parties. Beyond this first conclusion, however, the facts ascertained by the court in the case cited do not apply to the matter at bar. It was there found that the note was executed "wholly in the interest and for the benefit of the plaintiff." The note having been executed for the benefit of the plaintiff, it was further found to be an accommodation note, and that its collection would operate as a fraud upon the defendant. There is nothing in this case to indicate such a condition of affairs. Defendant desired "a show to make something for himself." By what course of reasoning are we to conclude that it was to the benefit of plaintiff to pay defendant's half of the purchase price of the property, and accept defendant's note therefor? How did that become an accommodation to the plaintiff? How could plaintiff perpetrate a fraud upon the defendant by advancing the latter's half of the purchase price of this property, and carrying it for him during the time specified in the note? If we were to speculate outside the written conditions of the agreement, we might say that there was more danger of plaintiff giving defendant an opportunity to watch the development of the mine for a year, and then, if the progress of the work was such as to discourage its owners, permit him to repudiate the contract, then there would be danger of fraud upon the defendant by generously advancing the money to carry his portion of the purchase price.

Now let us consider the conditions under which parol evidence may be admitted to vary the terms of a promissory note. In Schurmeier v. Johnson, 10 Minn. 319 (Gill. 250), the court, in discussing this...