West Rutland Trust Co. v. Arthur A. Houston

• Decision Date: 13 January 1932
• Parties: WEST RUTLAND TRUST CO. v. ARTHUR A. HOUSTON ET AL
• Court: Vermont Supreme Court

158 A. 69

104 Vt. 204

WEST RUTLAND TRUST CO. v. ARTHUR A. HOUSTON ET AL

Supreme Court of Vermont

January 13, 1932

Special Term at Rutland, November, 1931.

Bills and Notes---Parol Evidence of Prior or Contemporaneous Agreement---Accommodation Party---Trial---Discretion of Court---Harmless Error---Parol Evidence Varying Terms of Note---G. L. 2886---Defense to Note Against Public Policy Unavailable---Liability of Maker and Indorser on Note Given as Collateral Security---Inadequate Briefing---G. L. 2895 2897---Holder of Note as Collateral for Pre-existing Debt as Holder for Value---Effect of Knowledge of Payee That Maker and Indorser of Note Were Accommodation Parties.

1. In ACTION OF CONTRACT on promissory note, evidence of prior or contemporaneous oral agreement that neither of makers of note would have to pay note, held properly excluded.

2. Negotiable instrument which expresses on its face absolute promise to pay cannot be cut down into conditional promise or enlarged, varied, or contradicted by evidence of prior or contemporaneous parol agreement.

3. Where employee of partnership, after conference with bank and at request of its treasurer, delivered to bank promissory note signed by him and another as collateral security for indebtedness of partnership to bank, held that partnership rather than bank, was accommodated party.

4. It is proper for court to prevent witness from repeating his testimony to avoid prolixity and undue emphasis.

5. Exclusion of legitimate evidence does not constitute reversible error, if it is subsequently admitted.

6. Parol evidence that promissory note was given to bank at its request to hold ostensibly as collateral security, but in fact to deceive bank examiner, upon understanding that it would be returned to makers after bank examiner had made examination of bank, held inadmissible as defense to action by bank on note.

7. Provision of Negotiable Instruments Act (G. L. 2886) that delivery may be shown to have been conditional or for special purpose only, and not for purpose of transferring property in instrument, presupposes legal condition or purpose.

8. Where note was given to bank merely as semblance of collateral security, to deceive bank examiner, held that transaction was illegal, and that it was against public policy to permit such illegality to be used as defense against note.

9. Makers of promissory note given to bank merely as semblance of collateral security, to deceive bank examiner, held bound as face of note discloses, especially where rights of third parties had intervened by subsequent bankruptcy of bank.

10. Reference to numerous transcript pages, apparently for convenience of Supreme Court in searching for purport of claimed offers and point of several exceptions, held insufficient to present any question for review.

11. Supreme Court will not search record for grounds upon which to reverse case.

12. Under provisions of Negotiable Instruments Act (G. L. 2895 2897), one who takes negotiable note as collateral to secure pre-existing debt takes for value, even though no independent consideration is given.

13. Accommodation makers held liable on note given to bank as collateral security for pre-existing debt, although bank knew at time of taking instrument that they were only accommodation parties, their liability under provisions of Negotiable Instruments Act being primary and absolute.

ACTION OF CONTRACT to recover on promissory note. Plea, special answer of failure of consideration and discharge by release or relinquishment of securities by the plaintiff. Trial by jury at the September Term, 1930, Rutland County, Buttles, J., presiding. Verdict and judgment for the plaintiff. The defendants excepted. The opinion states the case.

Judgment affirmed.

Novak, Bloomer & Spero for the defendants.

Stickney, Sargent & Chase for the plaintiff.

Present: POWERS, C. J., SLACK, MOULTON, THOMPSON, and GRAHAM, JJ.

OPINION

GRAHAM

The action is brought by the receiver of the plaintiff bank to recover of the defendants, as makers, the balance due upon a promissory note. The execution and delivery of the note to the plaintiff, as payee, and the sum due thereon, are conceded. The special defenses pleaded by the defendants are: (1) Failure of consideration, and (2) discharge by release or relinquishment of securities by the plaintiff. The trial was by jury, and, at the close of the evidence, a verdict was directed for the plaintiff. The defendants excepted to the direction of a verdict and to the judgment thereon. The case is here on defendants' exceptions.

The evidence weighed in the light most favorable to the defendants tended to show that on January 2, 1929, F. L. Jones was treasurer of the plaintiff bank, and the defendant Buck was an employee of the Buck Lumber Co., a partnership consisting of A. E. Buck and R. W. Buck. As a result of a talk then had between Jones and defendant Buck, a promissory note, dated January 2, 1929, payable to the order of the plaintiff two months after date, signed by defendant Buck, as maker, and indorsed by defendant Houston, was delivered to the plaintiff as collateral security for the indebtedness of the Buck Lumber Co. to it. The note in suit is a renewal of the note dated January 2; it is dated March 2, 1929, made payable to the order of the plaintiff thirty days after date, and signed by both defendants, as makers.

The defendant Buck testified that, before the note in suit was signed, he had a talk with Jones in which Jones told him that the bank examiner had not been to the bank, so he had been unable to use the former note, and he wanted a new note for the same purpose; that he expected the bank examiner there very soon, and the Buck Lumber Co., had a larger indebtedness than he thought the bank examiner would like; that he was afraid not to have some extra collateral there to show when the examiner came through, and it was to be used for that purpose only; that this note was to be held by the bank as collateral for the Buck Lumber Co.; that Jones requested Buck to get Houston to sign another note with him to be held until the examiner had examined the books and then it would be returned to either Houston or himself. Defendant Houston testified that he had a talk with Buck about signing the note in suit, in which Buck told him the purpose of the note, and after that talk he signed it.

The defendants introduced in evidence a note, marked "Exhibit C," signed by Buck Lumber Co. as maker, and by A. E. Buck and R. W. Buck, as indorsers, dated March 2, 1929, and for the same principal amount as the note in suit, and made payable to the order of the plaintiff one month after date. This note was received in support of the claim of the defendants that the note here sued upon was held by the plaintiff as collateral security for Exhibit C. A payment of one thousand dollars was made by or through A. E. Buck, and was credited upon both the Buck Lumber Co. note, Exhibit C and the note in question.

The questions presented by exceptions I to XI, inclusive, overlap, and are many times duplicated, but we interpret the record as presenting two questions under this group of exceptions, (1) whether it was error to exclude evidence of a prior or contemporaneous oral agreement, in effect, that neither of the defendants would have to pay the note; and (2) whether it was error to exclude defendants' offers, in effect, that the plaintiff's treasurer told Buck that he would have to get Mr. Houston to sign another note in place of the first one, as he expected the bank examiner very soon, and that this note would be put in as collateral only to the indebtedness of the Buck Lumber Co.; that the Buck Lumber Co. had a big indebtedness and he was afraid of what the bank examiner might say; that the note would not be put through the offering book, but would be returned to one of the defendants after the bank examiner had made his examination of the bank; that upon that understanding the defendants signed the note. We will consider these questions in the order stated. The evidence offered under 1 was an attempt to vary and contradict the terms of the note by oral testimony. The familiar rule that a negotiable instrument which expresses on its face an absolute promise to pay cannot be cut down into a conditional promise, or enlarged, varied, or contradicted by evidence of a prior or contemporaneous parol agreement, has been stated and applied in two recent cases of this Court. Citizens' Sav. Bk. & Tr. Co. v. Paradis & Sons, 102 Vt. 114, 117, 146 A. 3; Alexander v. Chevalier, 98 Vt. 230, 234, 126 A. 498. The fallacy of the defendants' contention is that they treat the plaintiff as the accommodated party. But this is not so. The Buck Lumber Co. is the accommodated party even if the request for the note came from the plaintiff's treasurer. G. L. 2899; Neal v. Wilson, 213 Mass. 336, 100 N.E. 544. The exclusion was correct.

The offers under 2 were a repetition of what had already appeared in evidence by the testimony of the same witness, and testimony to the same effect was repeated by him later in the trial. It is proper for the court to prevent a witness from repeating his testimony to avoid "prolixity and undue emphasis." Goodwin v. Holmes, 87 Vt 477, 478, 89 A. 742. The exclusion of legitimate evidence does not constitute reversible error, if it is subsequently admitted. State v. Lapan, 101 Vt. 124, 132, 141 A. 686. But this evidence was not...