Case ID: ohio-st_46/html/0601-01.html
Source: Caselaw Access Project
Author: {"author": "Minshall, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Jacobs v. Mitchell et al.
    1. The time of payment, as fixed by a note, may be controlled by a separate written agreement made and entered into by the parties at the time of the execution of the note.
    2. A made and delivered to B his promissory note for the payment of a certain sum of money thirteen months after date. They also, concurrently therewith, made and entered into a separate written agreement, that the note should not become due and payable until C (for whom B was acting as agent) should sell for A a certain number of bushels of oats at a certain price.
    
      
      Jleld: That an action on the note cannot be maintained until the terms of the concurrent written agreement have been complied with: and, further, that such is the rule in an action by a holder, who acquired his title with notice of the agreement.
    3. The maker, when sued upon a note, may, as a defense, show that it is founded upon an illegal agreement, although.it appears that he is in pari delielo, where the suit is by a party to the agreement, or by one having acquired his title with notice.
    (Decided December 3, 1889.)
    Error to the Circuit Court of Allen County.
    The suit below was brought by the holder against the maker of a promissory note, the holder averring that he became the owner of it for a valuable consideration before it became due. The note is as follows :
    “ $400. December 9, 1884.
    Thirteen months after date I promise to pay to T. J. McElroy or bearer, four hundred dollors, value received, 6 per cent, interest.
    J. W. Jacobs.”
    The questions arise upon a demurrer to the answer, which is as follows:
    
      First defense. — The said defendant, for amended answer to plaintiff's petition says, that concurrent with the execution and delivery of the note upon which this action is brought, the payee thereof, one T. J. McFlroy, representing himself to be the agent of the “Crawford, Henry & Williams County Bohemian Oats Association,” executed and delivered to said defendant a written agreement, said T. J. McElroy representing to said defendant that he, the said McFlroy, had full authority to bind said company as its agent.
    It is expressly stated in said written agreement, executed and delivered by said McElroy to said defendant, that the note given by said defendant to said T. J. McElroy should not be due and payable, and the amount therein named be called for, until said Bohemian Oats Association should sell for said J. W. Jacobs eighty bushels of Bohemian oats at ten dollars per •bushel.
    This said agreement was taken by said J. W. Jacobs as a part consideratien for the amount named in said note, which ■said Jacobs agreed to pay upon fulfillment of said written .agreement. The only other consideration ever received by ■said Jacobs for said note was 40 bushels of oats, which were -not worth more than 40 cents per bushel when received. The -terms of said written agreement have never been complied with, either by said T. J. McElroy, or the said Oats Association.
    The plaintiffs, before their alleged purchase of said note, knew that said written agreement existed, and had full notice •of the force and intention thereof, and defendant denies that •plaintiffs purchased said note before maturity.
    
      Second defense. — Said defendant says that the said note upon which this action was brought, was obtained from said defend•ant by one T. J. McElroy (payee) by fraud, and was disposed of by said McElroy fraudulently, and that said fraud consisted of this, to-wit:
    The said T. J. McElroy, on or about the 9th day of December, 1884, represented to said defendant that he was the agent of the “ Crawford, Henry & Williams County Bohemian Oats Association,” and for the purpose of defrauding said •defendant, and to obtain his signature to a promissory note, agreed to deliver to said defendant 40 bushels of so-called Bohemian oats, representing falsely that said oats were of an extraordinary quality and value, when in fact the said oats' were of no more value than oats ordinarily raised by farmers; and for the further purpose of defrauding said defendant, said T. J. McElroy represented and agreed on the part of said •company, that if said defendant would take said 40 bushels of •oats, and deliver to said McElroy his promissory note for the sum of $400, that he, the said McElroy, would hold said note and not dispose of it until after the said Bohemian Oats Company should sell for said Jacobs 80 bushels of oats out of the' next year’s crop at $10 per bushel, and that said note would then, and not until then, have to be paid by said Jacobs.
    
      Said agreement by said McElroy on tbe part of said, company was in tbe form of a partly written and partly printed' bond, and was delivered by said McElroy to said defendant concurrent with the delivery of said note, who relying on the said false and fraudulent statements of said McElroy, and believing that they were true (when in fact said false representations were made with intent to defraud said defendant by said McElroy), did sign said note, and deliver the same to said McElroy, who, contrary to his said agreement and for the purpose of defrauding said defendant, disposed oí said-note so that defendant might not be able to make any defense thereto. Said agreement by said McElroy to sell, or cause-to be sold by said company, said eighty bushels of oats has not been performed, although the time has long since expired when said oats were to be sold, and said Jacobs retained 80 bushels of said oats, and still retains said oats, for the purpose of performing said contract on his part.
    The plaintiffs, defendant avers, took said note with knowledge of said contract between said McElroy and said defendant ; and defendant further avers that plaintiff is not a bona fide holder of said note.
    Wherefore defendant asks that he may go hence with his costs.
    The demurrer was sustained and judgment rendered for the plaintiff; and, on proceedings in error, the judgment was affirmed by the circuit court.
    
      James 0. Older, for plaintiff in error.
    This case stands as if between the maker and payee of the note, by the averments of the answer. There was at least a partial failure of consideration. Edwards on Notes and Bills, 3 Ed., sec. 167.
    The note and contract constitute one and the same contract, though on different papers. Carr v. Hays, Cent. Law Jour., vol. 25, p. 32; Shirley v. Welsh, 2 C. C. R. 401-404; Kitchen v. Loudenback, 3 C. C. R. 228; Davis v. Seely, vol. 20 Law Bull. 215,
    
      
      Frank E„ Mead, for defendant in error.
    In order that the several agreements shall be construed together as forming one agreement, it must be between the same identical parties; and where, as in this case, an ordinary promissory note, for the unconditional payment of money, at a given time, for a definite amount, was given, it cannot be explained or qualified by any other written instrument, even as between the original parties, unless made at the same time and executed by the same identical parties who executed the note; nor could parol testimony be admitted to qualify the express terms of the note. Webb v. Spicer, 13 Q. B. 886, 899; 66 Eng. C. L. 898; Harley v. Welb, 2 C. C. R. 57; 17 Law Bull. 249.
   Minshall, C. J.

We think the court erred in sustaining the demurrer to the answer of the defendant. The first defense is based upon the non-performance of a contemporaneous written agreement, made and entered into by the parties in regard to the note, and of which, it is averred, the plaintiff had notice when he became the holder of it. He then stands in the shoes of the original payee, McElroy. Although the note stipulates that it is payable thirteen months after date, still this must be controlled, as between parties and holders with notice, by the written agreement, that it is not to become due and payable until th§ association has sold for the maker 80 bushels of oats at the price named. 2 Parsons on Notes and Bills, 144, 534. It is not necessary that an answer should be returned to the question, why the parties should have subjected the absolute stipulation of the note as to the time of payment, to the provisional terms of the written agreement. It is sufficient to say that they have seen fit to do so, and the’ agreement is binding on the holder. The effect of it is to give the maker the right to pay the note according to its terms, or to decline to do so until the terms of the written agreement are complied with, if, in his judgment, it would be more prudent to do so. This branch of the answer, then, states a sufficient defense to the action — non-performance of the agreement.

The case of Webb v. Spicer, 66 Eng. Com. Law, 894, 898, is, when rightly considered, not in conflict with this holding. The point of that decision was, that the written agreement was-not between the parties to the note. Here, it is. The fact that the suit is not between the original parties to the note and agreement, does not affect the question, since the plaintiff' acquired his title'with notice, and stands in the shoes of the original payee

The second defense is based upon the alleged fraud of McElroy in obtaining the defendant’s signature to the note by fraudulent representations as to the value of the oats. As it is also averred that the plaintiff took the note with knowledge of the fraud, the facts averred certainly constitute a defense, and the demurrer should have been overruled.

Neither of these defenses show that the maker was a party to any contemplated fraud upon the public. If the averments be true, and they are admitted by the demurrer, he was simply deceived into the belief that money could honestly be made out of the introduction of a new variety of oats, and the assumption that he was a party to any contemplated fraud on others at the time he executed the note, is inconsistent with the averments of his answer. .

But if the assumption were true, still the illegal character of the consideration might be plead as a defense by the maker to an action on the note by the other party or any holder of it with notice. Complicity in a wrong may defeat a party who, by action, seeks to enforce an executory contract based upon. it, or to obtain affirmative relief against the contract, as by injunction or cancellation; but such complicity does not preclude a defendant from pleading the facts as a defense, although he may be in pari delicto. Roll v. Raguet, 4 Ohio, 400; McQuade v. Rosecrans, 36 Ohio St. 442; Kahn v. Walton, 46 Ohio St. 195, 209.

Judgment reversed, and cause remanded to the court of common pleas, with directions to overrule the demurrer, and for further proceedings.