Jefferson Standard Life Ins. Co. v. Morehead

Citation183 S.E. 606,209 N.C. 174
Decision Date22 January 1936
Docket Number688.
CourtUnited States State Supreme Court of North Carolina

Appeal from Superior Court, Guilford County; Pless, Judge.

Action by the Jefferson Standard Life Insurance Company against Garrett Morehead and others. From an adverse judgment, the defendants appeal.

New trial.

Parol evidence rule is not violated by engrafting parol trust on legal title where declaration is not in favor of grantor.

Civil action to recover from indorsers $4,700, balance alleged to be due on a promissory note, executed by Alpha Mu Building Corporation to plaintiff March 15, 1930, and now owned and held by plaintiff.

In the spring of 1930, the Alpha Mu Chapter of the Kappa Sigma Fraternity was desirous of building a chapter house for the use of the fraternity at Chapel Hill. Negotiations were had with the Jefferson Standard Life Insurance Company for a loan of $5,000. "The financing of the arrangement," according to plaintiff's president, was "to be made with John Umstead." He was the alter ego of the plaintiff in the transaction. The loan was to be secured by deed of trust on real estate, and the understanding was that the note would not be delivered until twenty-five members of the fraternity had indorsed it, including Mr. Charles T Woollen. Umstead, with knowledge of this understanding, and as a party to it, assisted in getting the signatures of the fraternity members. Only seven indorsers were actually secured before the note was delivered, and Mr. Woollen was not among them.

The pertinent part of the indorsement, appearing on the back of the note, is as follows: "We, the undersigned endorsers of this note * * * hereby agree to remain and continue bound for the payment of the principal and interest provided for by the terms of this note, irrespective of and without regard to any agreement or agreements relative to other endorsement or without regard to who, in addition to ourselves, may or may not endorse this note."

The defendants tendered the following issue, which was raised by the pleadings and supported by testimony duly proffered "Was it a condition that the note sued upon should not be delivered until 25 members of the Fraternity had endorsed the same, including Mr. Charles T. Woollen?"

The court declined to submit the issue, ruled out the defendants' proffered testimony, directed a verdict for plaintiff, and entered judgment accordingly.

Defendants appeal, assigning errors.

Manning & Manning, of Raleigh, and R. M. Gantt, of Durham, for appellants.

Smith Wharton & Hudgins, of Greensboro, for appellee.

STACY Chief Justice.

The proffered testimony of the defendants was excluded upon the theory that it runs counter to the terms of their written indorsement. White v. Fisheries Products Co., 183 N.C. 228, 111 S.E. 182; Industrial Loan & Inv. Bank v. Dardine, 207 N.C. 509, 177 S.E. 635.

It is well-nigh axiomatic that no verbal agreement between the parties to a written contract, made before or at the time of the execution of such contract, is admissible to vary its terms or to contradict its provisions. Dawson v. Wright, 208 N.C. 418, 181 S.E. 264; Coral Gables v. Ayres, 208 N.C. 426, 181 S.E. 263; Carlton v. Central Oil Co., 206 N.C. 117, 172 S.E. 883; Jobbers' Overall Co. v. C. S. Hollister Co., 186 N.C. 208, 119 S.E. 1; Ray v. Blackwell, 94 N.C. 10. As against the recollection of the parties, whose memories may fail them, the written word abides. Walker v. Venters, 148 N.C. 388, 62 S.E. 510. The rule undoubtedly makes for the sanctity and security of contracts. Thomas v. Carteret County, 182 N.C. 374, 109 S.E. 384; Boushall v. Stronach, 172 N.C. 273, 90 S.E. 198; Rousseau v. Call, 169 N.C. 173, 85 S.E. 414; Woodson v. Beck, 151 N.C. 144, 65 S.E. 751, 31 L.R.A. (N.S.) 235.

On the other hand, there are a number of seeming exceptions, more apparent than real perhaps, as well established as the rule itself. Roebuck v. Carson, 196 N.C. 672, 146 S.E. 708. The decisions are to the effect that the rule which prohibits the introduction of parol testimony to vary, modify, or contradict the terms of a written instrument, is not violated:

First, by showing a conditional delivery of said instrument. Thomas v. Carteret County, 182 N.C. 374, 109 S.E. 384; Garrison v. J. I. Case Threshing Machine Co., 159 N.C. 285, 74 S.E. 821; Kernodle v. Williams, 153 N.C. 475, 69 S.E. 431, 34 L.R.A. (N.S.) 934.

Second, by showing failure of consideration. Williams v. Dixie Chevrolet Co., 209 N.C. 29, 182 S.E. 719; American Agricultural Chemical Co. v. Griffin, 202 N.C. 812, 164 S.E. 577; Swift & Co. v. Aydlett, 192 N.C. 330, 135 S.E. 141; Pate v. Gaitley, 183 N.C. 262, 111 S.E. 339; C.S. § 3008.

Third, by showing mode of payment and discharge as contemplated by the parties, other than that specified in the instrument. Bank of Chapel Hill v. Rosenstein, 207 N.C. 529, 177 S.E. 643; Kindler v. Wachovia Bank & Trust Co., 204 N.C. 198, 167 S.E. 811; Wilson v. Allsbrook, 203 N.C. 498, 166 S.E. 313; Stockton v. Lenoir, 198 N.C. 148, 150 S.E. 886; National Bank v. Winslow, 193 N.C. 470, 137 S.E. 320.

Fourth, by showing that one, ostensibly a joint promisor or obligor, is in fact a surety. Furr v. Trull, 205 N.C. 417, 171 S.E. 641; Barnes v. Crawford, 201 N.C. 434, 160 S.E. 464; Welfare v. Thompson, 83 N.C. 276.

Fifth, by showing that an instrument apparently under seal is a simple contract, provided there is no recital of a seal in the instrument, such as ""witness my hand and seal," and it is not required by law to be under seal. Williams v. Turner, 208 N.C. 202, 179 S.E. 806; Baird v. Reynolds, 99 N.C. 469, 6 S.E. 377; Yarborough v. Monday, 14 N.C. 420. Of course, in any event, the maker would have the burden of overcoming the presumption arising from the presence of a seal.

Sixth, by showing the whole of a contract, only a part of which is in writing, provided the contract is not one required by law to be in writing and the unwritten part does not conflict with the written. Dawson v. Wright, supra; Henderson v. Forrest, 184 N.C. 230, 114 S.E. 391; Evans v. Freeman, 142 N.C. 61, 54 S.E. 847.

Seventh, by showing a subsequent parol modification, provided the law does not require a writing. Grubb v. Ford Motor Co., 209 N.C. 88, 182 S.E. 730; Farmers' Co-operative Fertilizer Co. v. Eason, 194 N.C. 244, 139 S.E. 376; McKinney v. Matthews, 166 N.C. 576, 82 S.E. 1036; Freeman v. Bell, 150 N.C. 146, 63 S.E. 682.

Eighth, by ingrafting parol trust on legal title, provided the confidence or declaration is not one in favor of grantor. Jones v. Jones, 164 N.C. 320, 80 S.E. 430; Gaylord v. Gaylord, 150 N.C. 222, 63 S.E. 1028; Avery v. Stewart, 136 N.C. 426, 48 S.E. 775, 68 L.R.A. 776; Sykes v. Boone, 132 N.C. 199, 43 S.E. 645, 95 Am.St.Rep. 619; Wood v. Cherry, 73 N.C. 110. In such case, clear, strong, and convincing evidence is required. Speas v. Merchants' Bank & Trust Co., 188 N.C. 524, 125 S.E. 398; Coxe v. Carson, 169 N.C. 132, 85 S.E. 224; Lamb v. Perry, 169 N.C. 436, 86 S.E. 179.

In the instant case, the defendants sought to show a contemporaneous oral agreement that the note was not to be delivered or to become effective as to them until twenty-five indorsers had been secured. The trial court was of opinion that this evidence was in conflict with the written indorsement. The position is correct as to any indorser, if any, who participated in the delivery of the note or who acquiesced in its delivery prior to its indorsement by twenty-five members of the Alpha Mu Fraternity or who thereafter ratified such delivery. Thomas v. Carteret County, supra. The moment the instrument became effective with the knowledge and consent of any indorser, it was no longer open to him to contradict the terms of his written indorsement. White v. Fisheries Products Co., supra.

But with respect to those indorsers, who, to the...

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