Albuquerque National Bank v. Stewart , 3 Ariz. 293 ( 1891 )

WELLS, J.

This was an action in the court below by the appellee against the appellants on a promissory note, which reads as follows: “$2,500.00. Albuquerque, New Mexico, Aug. 29, 1887. Sixty days after date we jointly and severally promise to pay, to the order of the Albuquerque National Bank, twenty-five hundred dollars at the Albuquerque National Bank, Albuquerque, N. M., with interest at the rate of one per cent per month from date until paid, value received. [Signed] W. G. Stewart. E. S. Clark. W. M. Fain. Thomas F. McMillon. A. Doyle.” Judgment on the note for appellee for $3,037.50. The errors assigned are: 1. The court erred in giving plaintiff instruction No. 1; 2. In excluding from the jury the testimony of the witnesses McMillon and Doyle, which tended to show that Strickler, plaintiff’s cashier, stated to the parties upon the note sued on, before and at the time that said sureties signed the same, that plaintiff held sufficient collateral to protect said sureties; and 3. In refusing to grant defendants a new trial for the reasons stated in the motion therefor. Appellants set out in their brief so much of their answer as they deemed necessary to present the issues and show the errors complained of, as follows: “For the second defense to plaintiff’s complaint and cause of action therein set up defendants say that, before the signing of the .said note by them, or either of them, and up to the signing of the same by each and every one of them, the said plaintiff therein, by its regular agent and cashier, represented and stated to these defendants, and to each of them, that he had for plaintiff, and that said plaintiff had then and there, ample security in the shape of collaterals belonging to said defendants, (Stewart and Clark, who were the principals in said note,) to secure the payment of said note when due, and to save these defendants, and each of them, from the payment of said note, or any portion thereof; and that said plaintiff did then and there so state to the defendants, and each of them, and promise to them, and each of them, that if they, and each of them, would so sign said notes, as sureties, as aforesaid, that plaintiff would hold said collaterals for the payment of said note, and would apply the proceeds, or such portion thereof as might he required, to the satisfaction thereof; and that the same would not, and never should, become a charge against these defendants, or either of them, nor should they, or either of them, ever be required to pay the same, or any portion thereof; and therefore defendants aver that, upon these terms and conditions, they were induced to sign, and upon these promises, so made by plaintiff, they did sign said note, and upon none others.”

This answer contains elements of contract and fraud. Upon which theory was the court to consider it? Upon which theory did the appellants intend the court should consider it? It cannot stand upon both theories at the same timé. If the bank represented as a fact, to induce parties to become sureties on a note, that it held collaterals sufficient to pay the note, when in fact it had no such collaterals, and by such misrepresentations of the facts parties did become sureties relying on such representations, and being ignorant of the facts, then an issue of fraud is raised. On the other hand, if the bank stated that it held collaterals as mere inducement to the promise or agreement to hold and apply the collaterals to the payment of the note and the promise or agreement was relied on, another and very different issue is presented. In other words, the plea cannot rest in fraud and contract at one and the same time, and both or either be relied upon at the option of the pleader. That appellants did not rest their defense in their answer on the ground of fraud, or fraudulent representations, we think is quite plain, because there is no allegation that' the representation of the bank that it held collaterals was untrue; nor is there allegation that, relying on such representation, they were thereby induced to become sureties on said note, and would not have become sureties but for such representations. The conclusion of the answer discloses, as we think, that the contract or promise element of the answer is the one relied upon. These are the concluding words: “And therefore defendants aver that, upon these terms and conditions, they were induced to sign, and upon these promises so made by plaintiff they did sign, said note, and upon none others.” The words “terms” and “conditions” and “promises” all relate to contract. We will therefore consider the answer in that light. As above indicated, the answer would not be good as a plea of fraud, for the lack of the averment that the statement and representations were relied upon as true, when in fact they were untrue, and defendants were injured thereby. Is it good and sufficient in law on the theory of contract or promise? The written contract (the .note) was that the makers would pay the note at the time expressed therein, without qualification or condition. When suit is brought, answer is filed, in substance, that the payee has no right to take judgment against the sureties at least, if we concede they were sureties, because plaintiff below agreed by parol, at the time these defendants signed the note, to* use collateral security, which it held, or claimed to have, at the time defendants signed the note as sureties. In other words, part of the contract was in writing, and part was by parol, or there was a contemporaneous collateral parol agreement. The parol agreement varies, if it does not contradict, the written undertaking. On the face of the written undertaking (the note,) there must be payment or judgment. “It is a firmly settled principle that parol evidence of an oral agreement alleged to have been made at the time of the drawing, making, or indorsing of a bill or note cannot be permitted to vary, qualify, or contradict, or add to or subtract from the absolute terms of the written contract.” 2 Parsons on Bills and Notes, 501; Specht v. Howard, 16 Wall. 564; Forsythe v. Kimball, 91 U. S. 294. The rule, in the language of Greenleaf, is: “The rule, briefly expressed, is, parol contemporaneous evidence is inadmissible to contradict or vary the terms of a valid written instrument.” 1 Greenleaf on Evidence, 351. The rule is elementary, and we think it applies in this case, at least, to the promise or contract element of the answer; indeed, the answer goes on the theory of the agreement to apply the collateral, and not to enforce the note against the sureties. The agreement and authorities contained in appellants’ brief are to the effect that the sureties may be relieved from liability by fraudulent representation of existing facts made to induce the contract of surety-ship. Appellants, on page 18 of their brief, say: “A contract of immunity from debt is a very different thing from a misrepresentation of facts which induce the assumption of a .debt.” “The one is simply a. void contract; the other, fraudulent misinformation.” “This is why the supreme court of the United States, in Bank v. Dunn, 6 Pet. 51, and Bank v. Jones, 8 Pet. 12, calls the transaction therein referred to ‘agreements’ and ‘contracts’; but would that court call Stickler’s information to these sureties, ‘There are collaterals in the possession of my bank,’ an agreement or contract? In whose language is such information called an agreement? In whose mind is such an attitude of affairs regarded a contract?” These extracts from the brief of appellants are quoted because they distinctly draw the line between the representations of existing facts by the bank on the one hand, and the promises of the bank on the other.

The language and the argument of the brief of appellants, and the 'authorities therein cited, and the second assignment of error, press the defense on the ground of misrepresentations of existing facts; in other words, fraud. But, as we have before shown, the answer itself goes on the theory of contract; the brief and assignment of errors, on the theory of fraud. We have considered both phases of the answer, that appellants might have the benefit of either. If accepted as a plea of fraud, though we are quite clear that it could not, as a whole, be so considered, the answer is wanting in certain averments, not necessary here to repeat, to make it a good plea of fraud. If accepted as averment of agreement or promise, it would operate to vary or contradict the written undertaking, and could not be proven by1 parol. We have not so far considered the question of the authority of the cashier to bind the bank by his representations or promises, but, for the purpose of the argument, have treated them as made by the bank. We think it quite clear that any assurance given or promise made by a cashier to parties about to become sureties, that their contract of suretyship would not be enforced against them, was a mere matter of form, etc., would not bind the bank in the absence of the affirmation of existing facts; and if such affirmations or representations were relied upon, the plea should have been in fraud. We have considered the first assignment of error, namely, the giving of the first instructions, and have reached the conclusion that it—the instruction—expressed the law of the case. We have also considered the second error assigned, by the exclusion of the evidence of McMillon and Doyle, and find no error in the exclusion upon the issues made by the pleadings. We note, in passing, that this second assignment of error is not well taken, for the further reason that the exclusion of evidence is not set out in the motion for a new trial as a ground therefor.

The third assignment of error is that the court erred in refusing to grant defendants a new trial for the reasons stated in the motion therefor. But these reasons were set out in the motion: 1. The court erred in giving in behalf of plaintiff [instructions] from 1 to 13, inclusive. Error was assigned as to No. 1 alone, and this we have considered. 2. In refusing defendants’ instruction No. 4. This instruction is not in the record, and consequently cannot be considered. We presume it was omitted for the reason that the ground was covered by other instructions. Counsel in their brief do not complain of the refusal to give this instruction. It would therefore be considered waived if it was in the record. The third ground of motion for a new trial is the modification of the instruction 5 by the court, adding the words, “provided you find he acted in the scope of his authority.” In the view of the issues made by the pleadings, this was not error, even if it otherwise would have been. The record discloses no error, nor do we think the defendants have any reason to complain of the admission or rejection of evidence, nor of the instructions of the court taken as a whole. The judgment below will stand affirmed.

Gooding, C. J., Sloan, J., and Kibbey, J., concur.