Smith v. Breeding

• Decision Date: 16 October 1923
• Docket Number: 35563
• Parties: SARDINE SMITH, Appellee, v. CHARLES BREEDING et al., Appellants
• Court: Iowa Supreme Court

195 N.W. 208

196 Iowa 670

SARDINE SMITH, Appellee, v. CHARLES BREEDING et al., Appellants

No. 35563

Supreme Court of Iowa, Des Moines

October 16, 1923

Appeal from Madison District Court.--LORIN N. HAYS, Judge.

ACTION to recover interest due on a promissory note. Defendants pleaded that plaintiff was not a holder of the note in due course, and that, at the time the note was given, the same was secured by a mortgage on certain real estate, and that the original payee of the note, at the time of the execution of the same, orally agreed with the makers to look entirely to the mortgage security for the payment of said note. The court sustained plaintiff's motion for a directed verdict, and the defendants appeal.

Affirmed.

A. W. & Phil R. Wilkinson, for appellants.

Leo C Percival, for appellee.

FAVILLE J. PRESTON, C. J., EVANS and ARTHUR, JJ., concur.

OPINION

FAVILLE, J.

I.

On September 25, 1918, the appellants executed and delivered to one W. E. Tucker, Jr., their certain promissory note for the principal sum of $ 1,880, due September 25, 1923, with interest at 7 per cent per annum from date, payable semiannually. This action is brought to recover an installment of interest claimed to be due and unpaid. Previous installments have been paid by appellants. Appellants admit the execution of the note in question, and plead that, at the time the same was executed, as part of the same transaction, they purchased certain real estate from Tucker, the payee of said note, and as part payment for said real estate executed and delivered to Tucker the note in suit, which was secured by mortgage upon the purchased real estate. It is appellants' contention that, at the time of the execution of said note and mortgage to Tucker, the latter orally agreed with the appellants that he would look entirely to said mortgage security for payment of said note, and would not hold the appellants personally liable on the note in suit.

It appears from the evidence that the note passed through the hands of three endorsers, before the same was transferred to the appellee. Each of the indorsements was made without recourse, and the transfer to the appellee was made by manual delivery of the note, and without indorsement thereon. The appellants contend that the negotiation of the note in violation of the alleged contemporaneous parol agreement to look only to the mortgage security for payment of the same, constituted a fraud in the inception of the note, and that the appellants were entitled to go to the jury on the question of whether the appellee was a purchaser in due course.

In the first place, the alleged breach of the claimed contemporaneous parol agreement not to hold the makers of the note personally liable thereon, but to look only to the security under the mortgage, did not constitute fraud in the inception of the note, and proof of such alleged contemporaneous parol agreement was not available to the appellants, to defeat the terms and provisions of the note. In its last analysis, appellants' contention is no more than that they executed and delivered a negotiable promissory note, secured by a mortgage on real estate, and that the payee of said note orally agreed, at the time, that the makers would not be personally liable upon the instrument which they had so executed. The appellants neither pleaded nor proved a conditional delivery of the note. Appellants' claim is simply an attempt to change, vary, and contradict the terms of the written instrument by proof of a contemporaneous parol agreement. The case comes squarely within the rule laid down by us in the recent case of Klemm v. Weil, 194 Iowa 1073, 190 N.W. 388, wherein we said:

"The alleged false representation to the effect that the defendant need never pay the note was not a representation at all, in a legal sense. It was an oral contemporaneous promise,...