Yates v. Brown, 7

• Decision Date: 19 November 1969
• Docket Number: No. 7,7
• Citation: 275 N.C. 634,170 S.E.2d 477
• Court: North Carolina Supreme Court
• Parties: Minnie W. YATES, Plaintiff (Respondent in this case), v. Joseph B. BROWN and wife Louise W. Brown, Defendants (Petitioners in thiscase).

Page 477

170 S.E.2d 477

275 N.C. 634

Minnie W. YATES, Plaintiff (Respondent in this case), v. Joseph B. BROWN and wife Louise W. Brown, Defendants

(Petitioners in thiscase).

No. 7.

Supreme Court of North Carolina.

Nov. 19, 1969.

Ottway Burton, Asheboro, for defendants-appellants.

Coltrane & Gavin and H. Wade Yates, Asheboro, for plaintiff-appellee.

LAKE, Justice.

It was error for the trial court to submit to the jury the question of whether the writing and signatures upon the back of the note in suit constituted a qualified or an unqualified indorsement. There being no dispute as to the content or the genuineness of the writing and no conflict in the admitted evidence as to the circumstances under which it was signed, the effect of it was a question of law for the court. Lowe v. Jackson, 263 N.C. 634, 140 S.E.2d 1; Robbins v. C. W. Myers Trading Post, Inc., 253 N.C. 474, 117 S.E.2d 438; Evans v. Rockingham Homes, Inc., 220 N.C. 253, 17 S.E.2d 125; Dillard v. Farmers' Mercantile Co., 190 N.C. 225, 129 S.E. 598; 11 Am.Jur.2d, Bills and Notes, § 61.

It was also error for the trial court, in instructing the jury concerning the construction of the writing upon the back of the note, to disregard or ignore the effect thereupon of the undisputed, contemporaneously executed, written instrument designated 'Assignment and Transfer.' This document is not mentioned in the court's charge to the jury except in the court's review of the evidence and of the contentions of the parties. The jury, having been erroneously saddled with the task of construing the writing upon the back of the note, was given no instruction as to the legal effect upon it of the separate but contemporaneously executed 'Assignment and Transfer.' In effect, the jury was instructed to disregard it.

By answering the issue submitted to it in favor of the plaintiff, the jury, necessarily, construed the writing and signature upon the back of the note as a general or un-qualified indorsement. In affirming the judgment rendered in the superior court upon this verdict, the Court of Appeals held, as a matter of law, that the defendants made a general or unqualified indorsement of the note. If this were the correct construction of the contract made by the defendants, the jury having reached the conclusion so compelled by the law, the above mentioned errors of the superior court would be harmless and would not justify disturbance of its judgment. We turn, therefore, to the construction of the defendants' contract, shown by the evidence of the plaintiff and by the admission in her pleadings concerning the separate instrument designated 'Assignment and Transfer.' The latter document was not mentioned by the Court of Appeals except in a brief summary of the defendants' pleading and evidence in the court's statement of the facts.

We are not here concerned with the rights of a holder in due course of a negotiable note against a party thereto who asserts a defense good as against an intermediate party to the instrument. This is a suit upon an alleged contract of indorsement by the alleged indorsee against the alleged indorser. The sole question is, What was their contract?

As between the immediate parties to it, the entire contract, proved by competent evidence, or admitted, must be taken into account in answering this question. Robbins v. C. W. Myers Trading Post, supra. Although any contract upon a negotiable instrument, including the contract of an indorser thereof, is a 'courier without luggage' (Overton v. Tyler, 3 Pa. 346), so as to preclude proof of a separate agreement inconsistent therewith, even though written, in a suit by a holder in due course (Sykes v. Everett, 167 N.C. 600, 83 S.E. 585, 4 A.L.R. 751; Stansbury, North Carolina Evidence, 2d Ed. § 256), this does not preclude consideration of the entire agreement, proved by competent evidence or admitted, in a suit between the immediate parties thereto; i.e., a suit between an indorsee and his indorser upon the alleged contract of indorsement. 11 Am.Jur.2d, Bills and Notes, § 619.

The Court of Appeals found no error in the rulings of the trial court sustaining objections to evidence offered by the defendants of oral statements made prior to, or contemporaneously with, the execution of the alleged indorsement and of the separate 'Assignment and Transfer,' the purpose of the evidence being to show that the writing upon the back of the note was intended by the parties to be an indorsement 'without recourse'; that is, a qualified indorsement. In Kindler v. Wachovia Bank & Trust Co., 204 N.C. 198, 167 S.E. 811, it was held that one, who had indorsed a negotiable note in blank, could not introduce evidence of an oral agreement to the effect that the indorsee would rely solely upon the collateral securing the note and would under no circumstances call upon the indorser to pay it. There, the proposed oral evidence clearly contradicted the contract of indorsement. The court said: 'The indorsement itself imports liability. When a contract is reduced to writing parol evidence will not be heard to contradict vary, or add to the written instrument.' In the Kindler case, however, the court recognized that 'in proper cases' it may be shown by parol evidence that payment was to be made out of a particular fund or that the obligation was to be discharged in a certain way. Obviously, the effect of such evidence is to 'add to' the written instrument. In Sykes v. Everett, supra, in a suit by one not a holder in due course, an indorser was permitted to show by parol evidence a contemporaneous agreement that he would not be called upon to pay the note until certain collateral had been exhausted. See also Stansbury, North Carolina Evidence, 2d Ed. § 256, for a discussion of the use of parol evidence to show the true contract between the immediate parties to a contract upon a negotiable instrument.

In the present case, we need not determine the correctness of the rulings of the trial judge in sustaining objections to parol evidence offered by the defendants for the reason that the written agreement proved or admitted by the plaintiff, considered in its entirety and construed in the light of circumstances shown by the plaintiff's own evidence, requires the conclusion that the defendants did not undertake the obligations of a general indorser.

All contemporaneously executed written instruments between the parties, relating to the subject matter of the contract, are to be construed together in determining what was undertaken. Combs v. Combs, 273 N.C. 462, 160 S.E.2d 308; Smith v. Smith, 249 N.C. 669, 107 S.E.2d 530. This is not varying the written contract. It is a construction of the written contract in its entirety. Thus, in the present case, the writing on the back of the note and the 'Assignment and Transfer' in the separate document must be construed together in determining what the defendants undertook or contracted. 11 Am.Jur.2d, Bills and Notes, §§ 70 and 619; Restatement of the Law, Contracts, § 235(c); Strong, North Carolina Index 2d, Contracts, § 13.

Undisputed circumstances surrounding the execution of the written documents may be considered by the court in construing the written contract, insofar as these circumstances cast light upon the intent of the parties as to the meaning of the written words. Chew v. Leonard, 228 N.C. 181, 44 S.E.2d 869; Jones v. Casstevens, 222 N.C. 411, 23 S.E.2d 303. The plaintiff's evidence shows that the consideration paid by her for the transfer of the entire lot of eleven notes and deeds of trust was approximately 50 per cent of the face value of the notes. Of course, this does not preclude the plaintiff from recovering the full face value of the note here in question if the defendants did, in fact, make the contract of a general indorser (11 Am.Jur.2d, Bills and Notes, § 346), but it is a relevant fact to be considered in the construction of the written undertaking.

It is undisputed that the entire written contract, both the statement upon the back of the note and the 'Assignment and Transfer' upon the separate paper, was prepared by the plaintiff's attorney. This has no bearing upon the matter except that, for this reason, any ambiguity in the contract must be resolved, if reasonably possible, by construction favorable to the defendants (Root v. Allstate Insurance Co., 272 N.C. 580, 158 S.E.2d 829; Wachovia Bank & Trust Co. v. Medford, 258 N.C. 146, 128 S.E.2d 141; Salem Realty Co. v. Batson, 256 N.C. 298, 123 S.E.2d 744) and the draftsman, being an attorney familar with the provisions of the Negotiable Instruments Law concerning the...