Case Name: Taylor v. Deese
Court: Arkansas Supreme Court
Jurisdiction: Arkansas
Decision Date: 1929-02-25
Citations: 179 Ark. 39
Docket Number: 
Parties: Taylor v. Deese.
Judges: 
Reporter: Arkansas Reports
Volume: 179
Pages: 39–43

Head Matter:
Taylor v. Deese.
Opinion delivered February 25, 1929.
Trimble & Trimble, for appellant.
C. V. Holloway and Reed & Beard, for appellee.

Opinion:
Hart, C. J.,
(after stating the facts). It is earnestly insisted by counsel for appellant that the judgment must be reversed because the circuit court erred in admitting parol evidence to show that appellees signed the note to the bank under tbe promises of its cashier that tbe note would not become effective until tbe bank took a mortgage from C. F. Deese, tbe principal in tbe note, upon a certain tract of land, and that this condition was never'performed by tbe ¡bank. It is contended that tbe admission of this testimony violated tbe well-known rule that parol evidence is not admissible when it tends to vary or contradict the legal effect of a written instrument. According to tbe parol testimony, tbe note sued on was not to become effective until tbe bank took a mortgage on 80 acres of land from C. F. Deese, tbe principal in tbe note. In other words, tbe note was not effective until this alleged condition was complied with. This made it a condition precedent to the final completion of tbe contract between tbe parties. Tbe testimony of appellees brings tbe case squarely within tbe principles of law announced in Halliburton v. Cannon, 160 Ark. 428, 254 S. W. 687, where tbe principles of law governing cases of this sort are stated in tbe second syllabus. In that case, after reiterating tbe well-settled rule that tbe verdict of a jury, or tbe finding of a court sitting as a jury, will not be disturbed on appeal if tbe evidence is legally sufficient to support it, tbe court held that, where a promissory note, made payable to plaintiff, was signed by defendant as an accommodation maker, upon express condition that two other persons should sign tbe note before it should become binding on defendant, and defendant notified plaintiff of such condition before tbe note was delivered to him, it was not error to permit defendant to prove tbe condition on which be signed tbe note, though plaintiff was not present when tbe note was, signed. The bolding of tbe court in that case was based upon tbe rule in Graham v. Remmel, 76 Ark. 140, 88 S. W. 899, to tbe effect that, in a suit on a note executed in payment- of tbe first premium of a policy of insurance, it is competent in defense to prove by parol evidence that tbe note was executed on condition that it should not be binding unless tbe policy, when it arrived, was satisfactory. In that case the court also had in mind that the payee of the note might be a holder in dne course under the rule announced in Cagle v. Lane, 49 Ark. 465, 5 S. W. 790.
This court is committed to the rule that the parties to the instrument may introduce parol evidence to show that the contract should not become effective unless certain conditions are first complied with. The reason is that such testimony does not contradict or vary the terms of the writing itself, hut simply provides that the written instrument or contract is never to become binding upon the parties unless and until the condition is complied with.
This principle was recognized and applied in American National Bank v. Kerly, 109 Ore. 155, 220 Pac. 116, 32 A. L. R. 262, and Caudle v. Ford (Ky.), 72 S. W. 270.
In the case first cited the Supreme Court of Oregon held that the payee of a note which does not accept it until after notice of conditions upon which some of the makers sign, and which had not been complied with, is not a holder in due course. -Parol evidence was. admitted in that case to show the conditions upon which the note was signed and that the bank had notice of before the note was delivered to it.
In the case last cited the Court of Appeals of Kentucky held that it was competent to show by parol evidence that, at the time the payees of an accommodation note indorsed the same, it was agreed that, before the maker should sell it, he should obtain the name of another party as payee, and that the latter should also indorse it, and the maker should execute a mortgage to indemnify the payees against loss. The court also held that, in an action by an indorsee against the indorsers of an accommodation note, where defendants all testified to an agreement whereby their indorsement was not to take effect until certain conditions were complied with, and that the plaintiff had notice thereof, a verdict for defendants could not be disturbed on appeal, though plaintiff testified that he purchased without notice of the agreement.
This 'principle is not in conflict with onr negotiable instrument statute. Subdivision 5 of .chapter 130 of Crawford & Moses' Digest deals with the subject of the rights of holders of negotiable instruments to sue. Section 7817 defines a holder in due course. He must be one who has no notice of any infirmity in the instrument at the time he takes it. Under § 7824 a negotiable instrument is subject to the same defenses as if it were non-negotiable in the hands of any other holder in due course.
In the case at bar, .if the note was delivered to Couch as cashier of the bank upon condition that it was not to become effective until the bank took the mortgage of C. F. Deese, the principal in the note, on the tract of land testified to, then the bank was not a holder in due course, and the court did not err in admitting parol evidence to show the condition upon which the note was signed and that the bank had notice of the condition at the time the note was delivered-to it. The evidence on this point was conflicting, and, under our well-settled rules of practice, the verdict of the jury is binding upon us on appeal.
Therefore the judgment will be affirmed.