Cockrell v. Taylor

In a suit on promissory notes verdict and judgment were for the defendants. The trial was had on pleas which alleged in substance that the notes sued on were delivered upon the express prior mutually agreed condition of delivery that they would be paid when, and at the time, deferred payments on the purchase price on certain land was made by a third party to the maker of the notes, the notes being given as a token of what was to become due to the payee as a real estate commission, and being expressly accepted by the payee as a real estate commission, and being expressly accepted by the payee upon conditional delivery as aforesaid; that it was expressly and mutually agreed between maker and payee that the notes were not to mature, or to be paid, until the third party made the payments upon which the delivery of the notes as collectible instruments was made a prior contingency; that if the third party failed to make the payments, and the defendants had to take back the lands, the notes were to become void.

The challenged pleas were supported by evidence which the jury obviously accepted as sufficient proof of the defendants' position so the only question necessary to be decided on this writ of error is the legal sufficiency of the pleas to constitute a defense of conditional delivery of the notes sued upon, under the rule of Martineau v. Hanson, 47 Utah 549, 155 Pac. Rep. 432, which was the authority upon which the lower court evidently upheld the pleas as stating a good defense, in line with the principles sustained in our own jurisdiction in Sumter County State Bank v. Hays, 68 Fla. 473, 67 Sou. Rep. 109.

In Martineau v. Hanson, supra, the Supreme Court of Utah was called upon to construe the Utah Uniform Negotiable Instruments Act which, on the subject of conditional delivery, is almost identical with our own statute (Section 6776 C.G.L., 4690, R.G.S.), which reads as follows:

"6776. (4690). WHEN INCOMPLETE AND REVOCABLE. — Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect hereto. As between immediate parties, and as regards a remote party other than a holder in due course, the delivery in order to be effectual must be made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may be; and in such case the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder in due course a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. And where the instrument is no longer in the possession of a party whose signature apepars thereon, a valid and intentional delivery by him is presumed until the contrary is proved. (Id. Section 16.)"

In Martineau v. Hanson, supra, the defendant pleaded that he had hired plaintiff to sell certain land owned by him, and that the commission for securing the purchaser by the plaintiff was to be a certain amount. The plaintiff produced such purchaser for the land and agreed with the defendant to take a promissory note for part of his commission. The note was delivered to the plaintiff by the defendant upon the condition that it was not to be paid until the purchaser should make a deferred payment on the price of the land, and that the note was not to mature until the purchaser had paid, and that unless the deferred payment was made by the purchaser to the defendant, the note was never to be paid. The purchaser defaulted in his payment, and an action was brought on the note. The Court held that his plea stated a good defense and said:

"(1) The first assignment relates to the ruling of the Court by which it excluded defendant's parol evidence offered by him for the purpose of proving the agreement between the parties set forth in the answer, namely, that the note was delivered upon the condition therein stated. Counsel for the defendant very forcibly insists that the court erred in excluding the proffered parol evidence. The plea in the answer and the evidence offered in support thereof were based upon Comp. Gen. Laws 1907, Section 1568, which, so far as material here, reads as follows:

"``Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties, and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may be; and in such case the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to make them liable to him, is conclusively presumed.'

"The section in question is part of the act relating to negotiable instruments, and is found, with some slight changes, in the statutes of the various states which have adopted said Act. The statute adopted by the State of Wisconsin is, word for word, like our own, and the Supreme Court of that state, in passing upon a similar question to that presented here, in the case of Hodge v. Smith, 130 Wis. 333, 110 N.W. 195 says:

"``It is familiar law, notwithstanding some conflict in the authorities, that a person may manually deliver an instrument, though it be in the form of commercial paper, to another, on its face containing a binding obligation in praesenti of such person to such other, with a contemporaneous verbal agreement that it shall not take effect until the happening of some specified event, and that the paper as between the parties will have no validity as a binding contract till the conditions shall have been satisfied; and that proof of such condition does not violate the rule that a written instrument cannot be varied by a contemporaneous parol agreement; that such evidence only goes to show that the instrument never had vitality as contract.'

"To the same effect are the following cases: Hill v. Hall,191 Mass. 265, 77 N.E. 831; McFarland v. Sikes, 54 Conn. 250, 7 A. 408, 1 Am. St. Rep. 111; Burke v. Delaney, 153 U.S. 228, 14 Sup. Ct. 816, 38 Law Ed. 698; Howell v. Ware, 175 Fed. 742, 99 C.C.A. 318; 1 Daniel, Negotiable Inst. Section 68a; Brannon's Negotiable Insts. Law, Section 16, and notes.

"Counsel for plaintiff contends, however, and it seems the court agreed with him that the effect of the proffered evidence merely went ``to show that the note in suit was to be paid out of a particular fund,' and that parol evidence was not admissible to establish that fact. To sustain that contention, the following cases are cited: Gorrell v. Home Life, etc., Co., 63 Fed. 371, 11 C.C.A. 240; National Bank v. Foote,12 Utah 157, 42 P. 205; Underwood v. Simonds, 12 Meto. (Mass.) 275 Clanin v. Easterly, etc., Co., 118 Ind. 372, 21 N.E. 35, 3 L.R.A. 863; Stewart v. Anderson, 59 Ind. 375; and Central Sav. Bank v. O'Connor, 132 Mich. 578, 94 N.W. 11, 102 Am. St. Rep. 433. A mere cursory reading of the foregoing cases will disclose that the decisions cited by plaintiff's counsel, with possibly two exceptions, have no controlling influence upon the question raised by defendant's counsel; and if we were to follow literally the two cases to which we have referred, we would have to repeal Section 1568, supra, by judicial edict, and would be required to overrule all the cases we have before cited.

"(2) While the fact that the note in question was delivered only upon the condition that it should not become a completed or enforceable contract unless the purchaser of the lands in question paid the sum stated is not as directly pleaded as it might have been, yet it seems clear to us that the condition is sufficiently set forth, and that as pleaded, it constituted a condition precedent to the right of recovery on the note, and one which the parties could legally agree upon.

"(3) An agent who is authorized by his principal to sell the latter's lands, certainly may agree that the payment of his commission, or any part of it, shall be dependent upon the condition that the purchaser shall pay to the principal either a specific part or all of the purchase price, and that in case the purchaser shall fail or refuse to do so without the fault or connivance of the principal the agent's commission shall be forfeited. Such an agreement is certainly not against any positive law nor contrary to public policy.

"(4) If, therefore, the principal executes his promissory note evidencing the agent's commission, they may undoubtedly agree that the same is delivered upon the condition that it shall not be an enforceable contract unless and until the condition is fulfilled. That such a condition may be proved by parol as between the parties to the instrument the decisions we have referred to leave no room for doubt. And it seems to us that our statute, to which we have referred, expressly so provides. We are clearly of the opinion, therefore, that the district court erred in excluding defendant's proffered evidence. * * *"

The rule sanctioned by practically a uniform line of authorities under the Uniform Negotiable Instruments Act is that parol evidence is admissible, as between the parties to a note, to show that a negotiable note, though absolute in form and manually delivered to the payee named in it, was understood and agreed between the parties on both sides, not to become a binding obligation, except upon the happening of a future certain event, since such evidence does not alter or vary the instrument, but tends merely to show that it never became a valid undertaking, especially where the agreed contingency (which must be a mutual understanding and not a unilateral reservation on the part of one of the parties to the instrument) affects the consideration for the note. See: Vincent v. Russell, 101 Oregon 672, 201 Pac. Rep. 433, 20 A.L.R. 417, and numerous cases cited. Our own case of Sumter County State Bank v. Hays, supra, is in line with the foregoing rule. See also 8 C.J. 206.

Just as a contract or promise to pay may be lawfully restricted to a particular fund as we have held in Ballas v. Lake Weir Light Water Co., 100 Fla. 913, 130 Sou. Rep. 421, which case involved a claim for broker's commission to lands under a contract of that kind, so may the same result be lawfully achieved as was held allowable in that case where negotiable notes representing the broker's commission have been prepared according to a mutual understanding that, as between the parties to such notes, they shall not become binding obligations as such, although manually delivered to the payee, until the happening of a certain further event, such as a third party's payment for the land which the promissory notes were to be conditionally delivered as a contingent payment of the broker's commission. However, the agreed conditional delivery must be according to the established understanding and agreement of both maker and payee and not a mere stated reservation or limitation on the part of the maker alone. It may further be said as a principle of presumptive law that where the instrument is actually manually delivered to the payee, a valid and unconditional delivery of the instrument by the maker thereof, is to be presumed until the contrary is alleged and proved, and that the doctrine herein stated is only applicable in a suit between the immediate parties to the instrument, that is, in a suit between the maker and the payee.

This case is to be distinguished from the case of Anderson v. Ax, 104 Fla. 294, 139 Sou. Rep. 798, with which holding the opinion in this case is in nowise in conflict when properly understood. In that case there was an attempt after, an admission of making and unconditionally delivering a promissory note, to assert a contemporaneous parol agreement between the maker and the payee that the note, so admittedly unconditionally deliveredas a negotiable promise to pay should not be binding and enforceable against the defendant, nor constitute a liability against the maker except in accordance with the conditions of the contemporaneous collateral oral agreement. The plea in the case of Anderson v. Ax, supra, plainly admitted on its face that "shortly after the closing of the transaction, defendant * * * for the purpose only * * * of assuring to plaintiff her interest * * * executed anddelivered to her the note sued upon herein," but attempted to alter and vary the legal effect of such admission by setting up an alleged contemporaneous oral agreement to the effect that the note delivered was not to be understood as an obligation of the defendant except in accordance with the oral understanding contemporaneously entered into. In that case the alleged contemporaneous oral agreement was, as this Court itself in that opinion pointed out, an "independent" contemporaneous parol agreement between the maker and the payee to the effect that the note, although delivered as such, should nevertheless not be binding and enforceable against the defendant maker. In this case the alleged contemporaneous oral agreement is alleged and shown to be a part of the terms of delivery of the note under which the property in the note was not to pass, except on certain conditions. The agreement was not an "independent" agreement to limit the legal effect of the terms of the note, but was one to limit the character of its delivery prior to its becoming a completed note.

The present case was tried on a correct theory of law, as it has been hereinbefore stated, therefore the view of a majority of the Court is that the judgment rendered in the Circuit Court should be affirmed.

WHITFIELD, C.J., and ELLIS, TERRELL, and BROWN, J.J., concur.

BUFORD, J., dissents.