Bumgardner v. Groover

95 S.E.2d 101 (1956) 245 N.C. 17

A. S. BUMGARDNER
v.
Barney Lee GROOVER and wife, Mary Lee Groover, and Mrs. Marietta Grant.

No. 235.

Supreme Court of North Carolina.

November 21, 1956.

B. Kermit Caldwell, Charlotte, for plaintiff, appellee.

J. C. Sedberry, Sedberry, Clayton & Sanders, Charlotte, for defendants, appellants.

PARKER, Justice.

With the exception of formal assignments of error, the defendants have only two assignments of error: one, to that part of the order sustaining the demurrer to the first further answer and defense and cause of action for affirmative relief, and two, to that portion of the order allowing the motion to strike from the answer the entire second further answer and defense.

This is not an action based on the $15,000 note executed and delivered to plaintiff by the defendants Barney Lee Groover and wife, Mary Lee Groover, as a purchase money note for a farm, and secured by a deed of trust on the property. This is an action to recover from the defendants $984.62 which the plaintiff paid the Union National Bank of Charlotte by reason of his liability as an endorser on defendants' sealed note for $1,484.62, which the defendants admit they executed and delivered to the bank with the plaintiff as an endorser thereon, and which note the plaintiff now holds.

In essence the allegations of defendants' first answer and defense, and cause of action for affirmative relief are these: The Union National Bank of Charlotte loaned the defendants $1,484.62 on their note under seal for that amount, endorsed by plaintiff, which sum was paid to plaintiff as a payment on the $1,000 installment past due on the purchase money note of $15,000 of Barney Lee Groover and wife, Mary Lee Groover, and of the accrued interest on this note, that Barney Lee Groover paid the bank $500 on this note, that the defendants defaulted in the payment of the remainder due on their note held by the bank, that the plaintiff by virtue of his liability as endorser on their note held by the bank paid the remainder due on the note, to wit, $984.62, and is now the holder of the note, that their note executed and delivered to the bank is null and void, because based on no consideration as to them, and that plaintiff is entitled to recover nothing on the note transferred to him by the bank, and Barney Lee Groover is entitled to recover from plaintiff the $500 he paid the bank on the note. In this part of their answer the defendants allege the note they executed and delivered to the bank "represents part of the identical money represented by the said note and deed of trust for $15,000.00."

Whether the allegations of defendants' first answer and defense, and cause of action for affirmative relief are sufficient can be tested by a demurrer. G.S. § 1-141; Jenkins v. Fields, 240 N.C. 776, 83 S.E.2d 908.

Accepting these allegations as true, this is the situation presented. The defendants make no contention that the purchase money note for $15,000 is not based upon an adequate legal consideration. They admit that the $1,000 installment payment due on this note 1 January 1953 was past due, when they executed and delivered their sealed note to the bank, and it is manifest from the allegations that this note was used by them to obtain money to pay this past due installment, which installment payment Barney Lee Groover and his wife justly and lawfully owed, and for which payment they are entitled to credit on their $15,000 note. It seems that the rest of the money secured from the bank was used to pay accrued interest on the $15,000 note, and they are entitled to credit for that payment. It also seems plain that the payment was made by the defendants to prevent a foreclosure of the deed of trust, and to permit Barney Lee Groover and wife to retain possession of the farm, because it nowhere appears in the Record that the deed of trust on the farm has been foreclosed, or that Barney Lee Groover and wife are not in possession of the farm. Certainly by accepting payment of this past due installment plaintiff waived and surrendered his right to foreclose the deed of trust by reason of the non-payment of the $1,000 installment due 1 January 1953 on the $15,000 note, and to proceed to judgment on the note, and the amount he received is a proper credit for the makers of the $15,000 note on the note.

G.S. § 25-30 (Negotiable Instruments) reads in part: "An antecedent or pre-existing debt constitutes value, and is deemed such whether the instrument is payable on demand or at a future time." "And it is well settled that a pre-existing, valid and, enforceable indebtedness or liability of a contracting party constitutes a sufficient consideration to support his undertaking on a bill or note. Consequently, it is generally held that a bill or note given for practically any kind of pre-existing debt or liability of the maker or drawer is supported by a consideration * * *." 10 C.J.S., Bills and Notes, § 150, p. 604.

Undoubtedly, the release or waiver of a legal right, or a forbearance to exercise a legal right, is a sufficient consideration to support a note made on account of it. Searcy v. Hammett, 202 N.C. 42, 161 S.E. 733; Exum v. Lynch, 188 N.C. 392, 125 S.E. 15; Lowe v. Weatherley, 20 N.C. 353, 355; 10 C.J.S., Bills and Notes, § 151, p. 618.

So far as Barney Lee Groover and wife, Mary Lee Groover, are concerned their sealed note to the bank, according to the allegations of their first further answer and defense and cause for affirmative relief, was based upon a valid consideration, and Barney Lee Groover is not entitled to recover from plaintiff the $500 he paid to the bank. As to them the demurrer was properly sustained.

Mrs. Marietta Grant, daughter of the other two defendants, says that she was not a party to the purchase of the farm, did not sign the $15,000 purchase money note, and that there was no consideration so far as she was concerned in respect to the note she executed with her parents and delivered to the bank. In 10 C.J.S., Bills and Notes, § 151 g (2), pp. 619 and 620, it is written: "It is well settled that the discharge, release, or forbearance of a right or claim against a third person, at the instance or request of the obligor, is sufficient consideration to support the latter's undertaking on a bill or note. A bill or note given in payment or extinguishment of a debt or liability of a person other than the maker is supported by consideration, although the debtor is wholly without means, or although the maker mistakenly believed that he was in turn indebted to the debtor. It is apparent, therefore, that if a bill or note of a relative or spouse of a debtor has been taken in discharge or payment of the indebtedness, or has induced a forbearance thereon, the instrument is supported by consideration, although, as already noted, neither the debt itself, see supra § 150 d, nor the interest or affection attendant on the relationship involved, see supra § 148, would of itself have been sufficient to sustain the undertaking."

In Bank of Lewiston v. Harrington, 205 N.C. 244, 170 S.E. 916, 917, it was held that the cancellation and surrender of deceased husband's notes to widow constituted a sufficient consideration for widow's notes. The Court said: "In the instant case the plaintiff had surrendered the notes of the deceased husband, and thereby discharged his estate from liability for said notes. 8 C.J. 219. This was a sufficient consideration for the notes sued on in these actions."

In Searcy v. Hammett, supra, the second headnote in our Reports correctly states, 202 N.C. 42, 161 S.E. 733: "Where the creditor of a corporation accepts its notes endorsed by its stockholders and directors in settlement of the debt he extends the maturity of the debt and gives up his right to reduce the debt to judgment until after the maturity of the notes, and the endorsement of such notes by a stockholder and president of the corporation is supported by a legal consideration, and he is liable thereon * * *."

Accepting as true the allegations of the defendants' first further answer and defense, when the plaintiff received the proceeds from the bank of the note executed by Mrs. Marietta Grant and her parents it constituted a payment of the $1,000 installment past due on her parents' $15,000 note, and plaintiff waived and surrendered his legal right to foreclose the deed of trust on the farm by their failure to pay this installment when due, and his legal right to proceed to judgment on the $15,000 note, and such payment and such forbearance is a sufficient consideration for the note executed and delivered by Mrs. Grant and her parents, as to them and as to her. Accepting the allegations of the first further answer and defense as true, it alleged no defense for Mrs. Grant and her parents, and no ground for affirmative relief, and as to Mrs. Grant and her parents the demurrer was correctly sustained.

The essence of defendants' second further answer and defense is this: That contemporaneously with the execution of the purchase money note for $15,000, secured by deed of trust upon the farm conveyed to the makers of the note, the plaintiff, the seller, agreed with Barney Lee Groover and wife, the makers of the note, that if they could not keep up the payments on the $15,000 note as provided, they could re-convey the farm to plaintiff, and plaintiff would mark the note and deed of trust "paid and satisfied" and surrender them to the makers. That they have not been able to keep up the payments, and are ready and willing, as they have been at all times, to convey the farm to plaintiff upon the cancellation of and surrender to them of all notes of theirs held by plaintiff, and that by reason of this oral agreement the note sued on, and all other obligations of theirs, have been settled, and plaintiff is estopped to maintain this action.

According to these allegations the parol agreement was to cancel the $15,000 note and the deed of trust securing it under certain conditions. No such agreement is alleged as to the note for $1,484.62, or any other note. The alleged parol agreement does not provide that any money paid to plaintiff on the $15,000 note by Barney Lee Groover and wife, Mary Lee Groover, shall be repaid to them by plaintiff, if they could not keep up the payments on the note, and re-conveyed the farm to plaintiff. Therefore, if a payment has been made on the note by the defendants, the cancellation according to the alleged oral agreement would be of the $15,000 note partially paid and the deed of trust securing it. That is manifest, because under such circumstances it would no longer be a note for the payment of $15,000. There is no allegation that defendants offered before or at the time the $1,484.62 note was executed by them to re-convey the farm to plaintiff, and demanded the cancellation of the $15,000 note and deed of trust, though they allege they have always been ready to do so. However, their acts in executing the $1,484.62 note and payment of $500 on it do not show a willingness to re-convey the farm at that time. There is no allegation that Barney Lee Groover and wife are not now in possession of the farm.

If the plaintiff brings an action to foreclose the deed of trust, or if Barney Lee Groover and wife bring an action to cancel the note and deed of trust, then the question as to whether the alleged parol agreement, if there was one, runs counter to the terms of the written instruments, and all other attendant questions, can be presented for decision. See Coral Gables, Inc., v. Ayres, 208 N.C. 426, 181 S.E. 263; Stanback v. Haywood, 209 N.C. 798, 184 S.E. 831.

Accepting the allegations of the second further answer and defense as true, it alleges no defense to plaintiff's cause of action in the instant case. The alleged parol agreement does not cover the $1,484.62 note. These allegations are clearly irrelevant, and the facts which these allegations relate were incompetent in evidence in this action. The court properly struck this second further answer and defense from the answer, upon plaintiff's motions. Daniel v. Gardner, 240 N.C. 249, 81 S.E.2d 660.

No error.

JOHNSON, J., not sitting.