Metropolitan Bank of Syracuse v. Brennan

• Decision Date: 06 June 1975
• Citation: 48 A.D.2d 254,368 N.Y.S.2d 914
• Parties: METROPOLITAN BANK OF SYRACUSE, Appellant, v. James A. BRENNAN et al., Respondents.
• Court: New York Supreme Court — Appellate Division

Page 914

368 N.Y.S.2d 914

48 A.D.2d 254

METROPOLITAN BANK OF SYRACUSE, Appellant, v. James A. BRENNAN et al., Respondents.

Supreme Court, Appellate Division, Fourth Department.

June 6, 1975.

Costello, Cooney & Fearon, Syracuse, for appellant (Bruce B. Roswig, Syracuse, of counsel).

Alfred J. Moorhead, Syracuse, for respondent Brennan.

Irwin Birnbaum, Syracuse, for repondents Engel (Mary Ann Abend Donnelly, Syracuse, of counsel).

Before CARDAMONE, J.P., and SIMONS, MAHONEY, GOLDMAN and DEL VECCHIO, JJ.

SIMONS, Justice:

Plaintiff appeals from orders which denied its motion for summary judgment on a promissory note. The individual defendants, respondents on this appeal, signed the note as co-makers. Special Term held that they could offer parol evidence to prove that the instrument never became effective because its delivery was conditional and the condition was not satisfied.

In June, 1970 the sellers of Brennan, Engel & O'Connor Insurance Agency sold that business to Phillip G. Kelley Corporation. The buyer assumed liability on the sellers' promissory note to plaintiff bank but it was agreed that the note would be renewed to lower the amount of the installment payments. Accordingly, on June 29, 1970 a renewal note in the amount of $23,775 was executed by the Phillip G. Kelley Corporation, by Phillip G. Kelley, President, and by the individual defendants Brennan, Engel, Sr. and Engel, Jr. Payments commenced July 16, 1970 and continued until default in June, 1971. By order dated July 13, 1973 plaintiff's motion for summary judgment against defendant corporation was granted, judgment was entered in the amount of $20,794.28 and the action against the individual defendants was severed. This motion followed.

Defendants deny the validity of the note and also their liability on it because they claim that the note was delivered to the bank conditionally. Defendants allege that the bank agreed that the note would not be enforceable until it was co-signed not only by these defendants but also by Phillip G. Kelley, individually, and Charles O'Connor, the signatures of all five individuals being a necessary condition precedent before the obligation of each individual as co-maker arose. These conversations between Engel, Sr. and a representative of the bank are said to have occurred in July and August, 1970, subsequent to the date of the note.

It is the general rule that evidence of what was said between the parties to a valid written instrument either prior to or at the time of execution may not be received in evidence to vary the terms of the note (Thomas v. Scutt, 127 N.Y. 133, 27 N.E. 961) and, of course, if unconditional delivery of the note by any defendant preceded the agreement, then clearly no subsequent oral understanding could modify that defendant's obligation (General Obligations Law, § 15--301(1)).

This general rule notwithstanding, defendants contend that parol evidence has always been admissible to show that what purports to be a written contract is no contract at all (Smith v. Dotterweich, 200 N.Y. 299, 93 N.E. 985; Peo. v. Kennedy, 16 A.D.2d 306, 227 N.Y.S.2d 971; and see Bersani v. General Accident Fire & Life Assurance Corp. Ltd., 36 N.Y.2d 457, 369 N.Y.S.2d 108, 330 N.E.2d 68, decided 5/5/75), or that delivery of a promissory note was conditional and that the conditions of delivery have not been met (Grannis v. Stevens, 216 N.Y. 583, 111 N.E. 263; Niblock v. Sprague, 200 N.Y. 390, 93 N.E. 1105; Higgins v. Ridgway, 153 N.Y. 130, 47 N.E. 32). It should also be noted that there are cases which have permitted parol evidence to prove that there was a condition of delivery requiring the signatures of others before the note became valid as to any individual signer (Annot. Parol Evidence--Bill or Note, 105 A.L.R. 1350; id. 54 A.L.R. 706; id. 20 A.L.R. 440).

Nevertheless, it is a little late in the day for defendants to claim that this note never became effective. It was executed by the corporation and the individual defendants as co-makers for good consideration and physically delivered to the bank which accepted it. At least three payments in reduction of the debt were made before it was claimed that conditional delivery was agreed upon by the bank, and payments on the note continued for a year thereafter before the default, followed by a judgment against the corporation. The position defendants urge would leave the bank with a renewed note which substituted the credit of the defaulting corporation alone for what had been defendants' liability on the original note and it would relieve defendants of any further responsibility for the debt.

Manifestly, the note became a binding obligation as between the bank and the corporation. Defendants do not deny that they signed it--what they really suggest is that notwithstanding those facts and conceding the parties' performance on the instrument, they may still vary the terms of their personal obligation by parol evidence. The rule is stated in Hicks v. Bush, 10 N.Y.2d 488, 491, 225 N.Y.S.2d 34, 180 N.E.2d 425:

...