Security Savings Bank v. Rhodes

• Decision Date: 26 November 1921
• Docket Number: 21727
• Parties: SECURITY SAVINGS BANK, APPELLEE, v. WALTER H. RHODES, APPELLANT
• Court: Nebraska Supreme Court

185 N.W. 421

107 Neb. 223

SECURITY SAVINGS BANK, APPELLEE, v. WALTER H. RHODES, APPELLANT

No. 21727

Supreme Court of Nebraska

November 26, 1921

APPEAL from the district court for Douglas county: CHARLES LESLIE JUDGE. Affirmed.

AFFIRMED.

Edward R. Burke, for appellant.

F. W Fitch, contra.

Heard before MORRISSEY, C. J., ALDRICH, FLANSBURG and ROSE, JJ BUTTON and COLBY, District Judges.

OPINION

FLANSBURG, J.

This was an action by the plaintiff, Security Savings Bank, against the defendant, Walter H. Rhodes, upon a promissory note, signed by the defendant and payable to the plaintiff. The defendant answered, admitting the execution of the note, but alleged that it was orally agreed that another person, not named in the note, should be held responsible, and that defendant should not be required to pay it. The court held that the answer of the defendant was insufficient and entered judgment on the pleadings. From this judgment the defendant appeals. The sole question is whether or not the answer, setting up such-an agreement, pleads a legal defense.

The answer alleges that the defendant rendered certain services for the plaintiff bank and for one Davis, president of the plaintiff bank. What proportion of the services was rendered for the bank is not stated, but much the greater part appears to have been for Davis individually. In any event, it is alleged, Davis took it upon himself to pay the defendant what was owing him, some $ 2,700, and arranged that the defendant should make out and sign a note in that amount, payable to the bank, deliver it to the bank and receive upon it its face value. This was done. It is further alleged that Davis made an oral agreement with the defendant that the defendant would not be required to pay the note, but that Davis would pay it, and, in order to insure payment by Davis, Davis gave his note to the defendant in a like amount. It is further alleged that the bank knew of this oral agreement. The allegations of the answer in that respect are, however, somewhat indefinite. What other officers of the bank knew of the transaction is not alleged. It may have been that the pleader meant no more than a legal conclusion that the bank was charged with knowledge because of the knowledge of the facts by its president. It appears from the pleadings that the note became due and was not paid.

If the bank had no knowledge of the transaction, it of course would not be bound by the agreement made by its president, to the effect that a note, based upon a good consideration and taken by the bank, should not be paid. Kennedy v. Otoe County Nat. Bank, 7 Neb. 59; note, 28 L.R.A. n.s. 501.

Assuming, however, that the allegations in the answer are allegations of ultimate facts and are sufficient to show that the plaintiff bank had knowledge of the oral agreement, the question presented is whether or not such an oral agreement could properly be proved, or whether the testimony to that end would be incompetent as evidence tending to vary or contradict the express terms of the written instrument.

Although parol evidence may be admissible to show the consideration of a written contract when that consideration is expressed as a recital of a receipt, as distinguished from a complete contractual stipulation (Mattison v. Chicago, R. I. & P. R. Co., 42 Neb. 545, 60 N.W. 925; Spiegal & Son v. Alpirn, p. 233, post); or to show a want or failure of consideration (Davis v. Sterns, 85 Neb. 121, 122 N.W. 672; Norman v. Waite, 30 Neb. 302, 46 N.W. 639); or to show that an instrument, purporting to be a written contract, is in fact a sham and was never intended as a contract between the parties (Coffman v. Malone, 98 Neb. 819, 154 N.W. 726, and note, L.R.A. 1917B, 263); or to show that the written instrument was conditionally delivered upon an oral agreement that it should not take effect as a contract until some condition had happened (Musser v. Musser, 92 Neb. 387, 138 N.W. 599); yet, on the other hand, when a written contract has been unconditionally delivered, in the sense that it is intended to take effect as a legal obligation, a contemporaneous oral agreement, providing that the contract is not to be performed if a certain condition or contingency should occur, cannot be shown, as such proof would have the effect of adding to, varying or contradicting the express terms contained in the writing.

The rule is succinctly stated in 22 C. J. 1148, sec. 1540, as follows: "The rule excluding parol evidence has no place in any inquiry unless the court has before it some ascertained paper beyond question binding and of full effect, and hence parol evidence is admissible to show conditions relating to the delivery or taking effect of the instrument, as that it shall only become effective upon certain conditions or contingencies, for this is not an oral contradiction or variation of the written instrument but goes to the very existence of the contract and tends to show that no valid and effective contract ever existed; but evidence is not admissible which, conceding the existence and delivery of the contract or obligation, and that it was at one time effective, seeks to nullify, modify, or change the character of the obligation itself, by showing that it is to cease to be effective or is to have an effect different from that stated therein, upon certain conditions or contingencies, for this does vary or contradict the terms of the writing."

For an able and exhaustive discussion of that rule and the authorities in relation thereto, see note, L.R.A. 1917C, 306.

In this case the written contract was an agreement that the defendant would pay on a fixed day, absolutely, a certain sum of money. Its express terms could have had no other meaning. The note was delivered to the bank and the defendant received the proceeds thereof. The agreement did not lack in consideration. That it was a subsisting contract must be conceded. By the very agreement sought to be proved Davis was to be responsible and pay it, and the defendant was to be relieved from that obligation. The bank was looking to the payment of the note. Evidence of such an oral agreement, as is set up by the answer, is inadmissible, as its effect would be to vary, by parol, the express terms of the note. Van Etten v. Howell, 40 Neb. 850, 59 N.W. 389; Aultman, Miller & Co. v. Hawk, 4 Neb. Unoff. 582; Nebraska Exposition Ass'n v. Townley, 46 Neb. 893, 65 N.W. 1062; Western Mfg. Co. v. Rogers, 54 Neb. 456, 74 N.W. 849; Waddle v. Owen, 43 Neb. 489, 61 N.W. 731; Colvin v. Goff, 82 Ore. 314, 161 P. 568, and note, L.R.A. 1917C, 307; 22 C. J. 1152, sec. 1542.

The defendant finds some support in certain decisions of this court which we find it necessary to discuss. In the case of First Nat. Bank v. Burmey, 91 Neb. 269, 136 N.W. 37 the defendant Britton signed a promissory note with one Burney, and, in an action upon the note, he set up as a defense an oral agreement that Burney was to pay the plaintiff all the proceeds of the sale of certain live stock; that, if Burney applied such proceeds upon the note, defendant's obligation was to then expire. Burney, however, did not so apply the proceeds of the sale and discharge the...