Opinion ID: 2226962
Heading Depth: 2
Heading Rank: 3

Heading: Parol Evidence of a Condition Precedent

Text: The Hlebechuks final assertion is that parol evidence is admissible to show that the note was delivered on a condition precedent that it was to become operative only when the balloon payment was made. The district court in its memorandum opinion said: The Defendants urge that they should be able to show intrinsic evidence that a condition precedent was to happen (full payment) before the note is operative. Amendment of Defendants' Answer to specifically plead this will not change the parol evidence rule. Neither will it come under any exception to the rule. It still results in an attempt to alter the terms of a written document which is clear, certain and unambiguous on its face. In Mattco, Inc. v. Mandan Radio Ass'n, Inc., 224 N.W.2d 822, 825 (N.D.1974) we said: North Dakota recognizes that a condition precedent under appropriate circumstances may be a prerequisite to the existence of a contract. Section 9-01-11, N.D.C.C., defines a `condition precedent' as  `... [A] condition which is to be performed before some right dependent thereon accrues or some act dependent thereon is performed.' On several occasions, this Court has considered the matter of conditions precedent, their existence and legal effect. 224 N.W.2d at 825. The existence of a condition precedent may be considered an exception to the rule or a situation where the rule has no application. Parol testimony is admissible to prove a condition precedent to the legal effectiveness of a written agreement, if the condition does not contradict the express terms of such written agreement. 224 N.W.2d at 825 (concurring opinion by Johnson). A condition precedent cannot be used to contradict express terms of a written contract. Mattco, Inc. v. Mandan Radio Ass'n, Inc., 246 N.W.2d 222, 228 (N.D.1976). It is also the established law in North Dakota that promissory notes may be subject to conditions precedent. First State Bank v. Kelly, 30 N.D. 84, 152 N.W. 125, 127 (N.D.1915). Parol evidence is admissible to prove the existence of a condition precedent to the effectiveness of the writing. Id. We agree with the reasoning used by the Supreme Court of Idaho in deciding Ventures, Inc. v. Jones, 623 P.2d 145 (Idaho 1981). In that case, the court held that the law prior to enactment of the U.C.C. regarding the admissibility of parole evidence to prove a condition precedent to a negotiable instrument was equally applicable to post U.C.C. cases. 623 P.2d at 149. In that case, the court said: Thus, even before the enactment of the Uniform Commercial Code, it was the rule in Idaho that where promissory notes are given subject to conditions upon their delivery, observance of those conditions is essential to the validity of the notes and that the annexing of such conditions to the delivery is not an oral contradiction of the written obligation.... The theory behind the cases cited above is that when a note is delivered subject to a condition, it does not become enforceable until the condition has been fulfilled. This theory has continued application in the code in I.C. § 28-3-306(c) [which is similar to § 41-03-36, N.D.C.C.], which lists the defense of nonperformance of any condition precedent as available against one not a holder in due course. 623 P.2d at 149. The Supreme Court of Idaho was discussing delivery for a special purpose but used the law concerning conditional delivery. Evenson contends that such parol evidence contradicts the unconditional promissory note and is inadmissible. Mattco, Inc. v. Mandan Radio Ass'n, Inc., supra, 246 N.W.2d at 228. We agree. Although there may be conditions precedent to negotiable instruments, this is not such a case at the condition precedent alleged by the Hlebechuks conflicts with the terms of the note. Such a conflict does not arise simply because a condition precedent would make the unconditional promissory note unenforceable; rather, the condition precedent is so inconsistent with the note as to require it to be in writing. Mattco, Inc. v. Mandan Radio Ass'n, Inc., supra, 246 N.W.2d at 228. In this case, the note does more than just establish a definite due date as all negotiable instruments must. The note contains four conceivable times for payment: (1) the note may be paid on the due date, two years after June 1, 1977; (2) the note may be prepaid at any time by the Hlebechuks; (3) the note may be accelerated by Evenson at any time that Jacobson renders full performance of the contract for deed; and (4) the note may be extended to June 1, 1981, if Jacobson chooses to exercise his option to extend the due date of the balloon payment under the contract for deed. It appears that all eventualities contemplated for payment of the note were included by the parties. Had the parties intended payment of the balloon payment as a condition precedent, it would have been easy to have so included it in the note. Having not done so, they cannot attempt to do so now through parol evidence, for to permit that would be to permit evidence of a condition precedent which is inconsistent with the other terms of the note relevant to payment. The condition precedent alleged by the Hlebechuks is so inconsistent with the terms of the note that oral evidence concerning it was properly excluded.