Dulaney v. Burke , 2 Idaho 719 ( 1890 )

SWEET, J.

On August 10, 1883, at Salt Lake City, Utah, John M. Burke executed and delivered a certain promissory note in the sum of $4,308.80, with interest at the rate of six per cent per annum until paid, due one year after date, and payable to H. Grafton Dulaney, or order. Before the maturity of said note defendant, Burke, became a resident of Idaho territory, and on the seventh day of October, 1887, plaintiff commenced an action in the district court of Idaho territory, first judicial district, in and for Shoshone county, for the collection of said note. Defendant sets up as a defense in said action an oral agreement, made at the time of, or prior to the execution of, said note, the substance of which is as follows: “That plaintiff was about to consummate the purchase of two mining claims, and desired the defendant to become the superintendent or manager thereof. To this proposition defendant replied that he did not care to enter into such an arrangement, unless there was something in it for him. Plaintiff thereupon offered to purchase the property, giving to defendant a one-half interest therein, the defendant to execute to plaintiff his promissory note for one-half the purchase price of said property, at the same time giving to defendant an opportunity to examine and test said mining property; and further agreeing that if, after such examination, defendant did not desire to pay the note, and retain his interest in the property, he might surrender said interest to plaintiff, and that, upon surrendering this interest, plaintiff would cancel defendant’s note given therefor. That, in accordance with this agreement, plaintiff purchased the property, taking a deed therefor in the names of plaintiff and defendant. That afterward defendant did examine and test the mines thus purchased, and concluded that he did not care to retain his interest in the same, and notified plaintiff that he was ready to execute a deed in favor of plaintiff to his interest in said mines whenever plaintiff would cancel said note. Wherefore, he prays judgment against plaintiff for the cancellation ■of said note, and for his costs,” etc.

At the trial defendant offered to prove said agreement, at the same time tendering a deed to the property, and plaintiff objected to the introduction of evidence to such effect, on the ground that it was an attempt to vary the terms of a written contract by parol evidence. The offer thus made was tendered in various forms, and always met by the same objection; and this objection, for the reason above set forth, was sustained by the court. The case was tried without a jury, and the court gave judgment for plaintiff in the sum of $5,692.80. Defendant excepted to the ruling of the court in excluding the evidence by which it was proposed to prove the agreement before mentioned; and the ruling thus made is the error assigned upon which defendant and appellant relies to reverse the order of the court below, overruling defendant’s motion for a new trial. Defendant cites Schindler v. Muhlheiser, 45 Conn. 153, as an authority in support of his interpretation of the law. Several other authorities are cited by appellant, more or less in line with the case just referred to; but unquestionably Schindler v. Muhlheiser is the strongest case presented by the appellant as-tending to support his claim in the issue at bar. After stating the facts in this case,-the court reaches three separate and distinct conclusions. They are as follows: “1. The note was given pursuant to, and in fulfillment of, an antecedent agreement between the parties; 2. That agreement shows that it was not given as evidence of any existing indebtedness, but as a means of accomplishing an ulterior object wholly in the interest and for the benefit of plaintiff; 3. Consequently the note was an accommodation note, the collection of which would operate as a fraud upon the defendant.” "We need not quote authorities to establish the principle that fraud vitiates any contract. The quotation of authorities upon this proposition is wholly unnecessary;, “and we repeat what has already been-decided over and over bj'-every court that ever considered the question, and what has been declared to be the law by every text-writer discussing it, that any contract may be assailed upon the charge of fraud, mistake,, or failure of consideration.

We will now consider whether the case at bar comes within any of these rules, or whether it comes within the rule laid down in the case first cited. Defendant offered to prove that the agreement was made prior to the execution of the note. To this-extent it bears some resemblance to the first conclusion reached by the court in Schindler v. Muhlheiser. But, after all, no contract can be executed before it is discussed in all of its forms and phases, and thoroughly understood and agreed on between the parties; and the execution of a written agreement, or contract, in accordance with such a discussion, would not be a fulfilling of an antecedent agreement. It is simply placing the agreement in writing, and thereafter the contents of the written agreement are to bear witness as to the intent of the parties. Beyond this first conclusion, however, the facts ascertained by the court in the case cited do not apply to the matter at bar. It was there found that the note was executed “wholly in the interest and for the benefit of the plaintiff.” The note having been executed for the benefit of the plaintiff, it was further found to be an accommodation note, and that its collection would operate as a fraud upon the defendant. There is nothing in this case to indicate such a condition of affairs. Defendant desired “a show to make something for himself.” By what course of reasoning are we to conclude that it was to the benefit of plaintiff to pay defendant’s half of the purchase price of the property, and accept defendant’s note therefor? How did that become an accommodation to the plaintiff? How could plaintiff perpetrate a fraud upon the defendant by advancing the latter’s half of the purchase price of this property, and carrying it for him during the time specified in the note? If we were to speculate outside the written conditions of the agreement, we might say that there was more danger of plaintiff giving defendant an opportunity to watch the development of the mine for a year, and then, if the progress of the work was such as to discourage its owners, permit him to repudiate the contract, then there would be danger of fraud upon the defendant by generously advancing the money to carry his portion of the purchase price.

Now, let us consider the conditions under which parol evidence may be admitted to vary the terms of a promissory note. In Schurmeier v. Johnson, 10 Minn. 319 (Gill. 252), the court, in discussing this question, says: “It is a rule well settled that, in the absence of fraud or mistake, parol evidence is inadmissible at law or in equity to vary a written contract. Such a contract cannot be varied, explained away, or rendered ineffectual by parol proof of any conversation or stipulation prior to or contemporaneous with its execution. It is conclusively presumed to set forth the whole agreement of the parties, and the extent and manner of their agreement.” Does defendant allege fraud as a reason why the plain terms and conditions of this note should not be executed? Does he aver a failure of consideration? Does he allege a mistake? These are the only grounds upon which the plain and specific utterances of a written agreement may be assailed and set aside. Not one of them comes within the proof tendered by defendant at the trial. He admits the execution, admits the consideration, admits the execution of the deed in his own name, admits that the note calls for the sum agreed to be paid for the property. Clearly, then, he is not within the rule which authorizes a court to set aside the provisions of a written contract upon the ground of fraud, mistake or failure of consideration. What, then, does he plead? He sets up, in effect, that the agreement is not all in writing, and asks permission to add to the contract signed by Mm on August 10, 1883, by inserting a condition concerning which the contract is absolutely silent. It is vain to say that these offers do not tend to vary the terms of the written agreement. An agreement for an option to purchase this half interest would have been as different in substance and in effect from the agreement actually before us as it is possible to make one contract different from another. Contracts cannot be added to or taken from in this manner. In Brown v. Spofford, 95 U. S. 480, tliis question is directly passed upon by the court. We quote from the decision: “Negotiable notes are written instruments, and as such they cannot be contradicted, nor can their terms be varied by parol evidence. And that proposition, is universally true where a promissory note is in the hands of an innocent holder. Where a bill of exchange was drawn in the usual form, and was protested for nonpayment, the court held twenty years ago that parol evidence of an understanding between the drawer and the party in whose favor the bill was drawn was inadmissible to vary the terms of the instrument.” The court then states the issue involved in Brown v. Wiley, 20 How. 442, and approves the same. Further on, in the same case (page 481) the court say: "Attempt was made in a leading case to prove that the payee agreed with the indorser that if he would indorse the note he should incur no responsibility, as the payment was secured by collaterals, and when offered in the circuit court the evidence was admitted; but the court, when the case was brought here on a writ of error, reversed the judgment, holding that the evidence should have been excluded”: Citing Banks v. Dunn, 6 Pet. 51. Continuing, and on the same page: “Decided cases of the most authoritative character have determined that parol evidence of an oral agreement alleged to have been made at the time of the drawing, making or indorsement of a hill or note, cannot be admitted to vary, qualify, contradict, add to, or subtract from, the absolute terms of a written contract.” (Specht v. Howard, 16 Wall. 564.) In the same case the court indorses the quotation already made from 10 Minn., in the following language: "In the absence of fraud, accident, or mistake, the rule is the same in equity as at law, that parol evidence of an oral agreement alleged to have been made at the time of the drawing, making, or indorsing a bill or note cannot be permitted to vary, qualify, contradict, add to, or subtract from, the absolute terms of a written contract”: Citing Forsyth v. Kimball, 91 U. S. 291.

Defendant contends that the payment of this note was dependent upon a condition, or that its delivery was dependent upon a condition, it matters not which. There is nothing conditional about the written agreement. It states clearly and specifically what the maker of the note promises to do. There is no condition about it; and if there was an agreement entered into at the time that defendant might do something else at his option, it would be a plain contradiction of the terms of the instrument itself. Quoting further from Brown v. Spofford, 95 U. S. 482, we find a declaration directly upon this point: "Parol evidence of an agreement made contemporaneously with a promissory note, which contains an absolute promise to pay at a specified time, is not admissible in order to extend the time for pajunent, or to provide for the payment out of any particular fund, or in any other way than that specified in the instrument, or to make the payment depend upon condition.” Authorities in support of this principle might be continued indefinitely. Those cited have been referred to, not so much to establish the principle, because it is conceded by both parties in the matter at bar, as to show, from the similarity of questions involved in the cases referred to, the erroneous position taken by defendant. Therefore, as the evidence rejected by the court below tended to establish an oral agreement different in form, different in purpose, and different in effect from .the written contract in issue, and as the effort to change those conditions is not based upon either a failure of consideration, fraud, or mistake, we hold that the court below did not err in refusing to admit the testimony, and that the judgment must be affirmed.

Beatty, C. J., concurs.