Bank v. Moore, 138 N.C. 529 (1905)

May 26, 1905 · Supreme Court of North Carolina

138 N.C. 529

BANK v. MOORE.

(Filed May 26, 1905.)

Action on Note — Defenses—Parol Evidence.

Where the defendant executed his note and received a valuable consideration therefor, the defense that there was an understanding and agreement at the time that payment should never be enforced or demanded, is not open to him, parol evidence being incompetent to contradict or modify the written contract.

ActioN by Western Carolina Bank and W. W. Jones, Receiver against C. B. Moore, beard by Judge Fred Moore and a jury, at tbe March Term, 1905, of the Superior Court of BuNcoMbe County.

W. W. Jones, Receiver of The Western Carolina Bank having found the note of defendant, to the amount of $600 among the assets of the bank, instituted this action against defendant, alleging that the note sued on belonged to the bank and was due and unpaid. The defendant answered and denied that the note belonged to the bank and by way of further defense averred that on or about the 22nd day of February, 1897, he was approached by one Lewis Maddox, at that time president of the Western Carolina Bank, who stated to him that J. E. Reed, who was the father-in-law of the defendant and a director of said bank, was largely indebted to said bank and that the bank had been criticised by the public and others interested in the affairs of the bank because of said fact — that is because said Reed, being such debtor, was also a director of the bank; that he (Maddox) and Reed had agreed together that the defendant should formally take an assignment of the stock which said Reed then held in the bank, to-wit, $500 of the same, and the defendant should formally execute his note payable to Reed therefor; ''That new stock should be formally issued to the defendant in place of the stock of said Reed, and that said note and said stock should be held by said bank, but that the same, the said note, should never be collected or presented for payment, and that said stock, although issued to the defendant, should be considered and remain the property of the said J. E. Reed; that said Reed should resign as such director in said bank, and that this defendant should formally become a director thereof in his place.”

“That thereupon this defendant, believing said transaction innocent in itself, and that thereby he would subserve the interest of said bank and of the said J. E. Reed, his father-in-law, he consented to make said note upon said terms and did then and there sign the same and deliver it to said bank through the said Maddox, its president, upon the terms and understanding stated in the first paragraph of this further defense; and the said note was held by said bank and said receiver took the same, if he took it all, and still holds it, upon said terms above set forth.”

“Wherefore, this defendant demands judgment that the said note be delivered up for cancellation and that he go hence without delay and recover of the plaintiff his reasonable costs in this action -behalf incurred.”

There was evidence that the defendant’s father-indaw, J. E. Reed, now dead, had been a stockholder and director in the bank and had borrowed a large sum of money which he still owed and the management of the bank was being criti-cised by reason of the loan of so much money to one of its directors. It was themipon determined, at the suggestion of the president, that Reed should sell his stock to defendant, resign as director and the defendant should become director in his place. In pursuance of this arrangement Reed surrendered his stock and same was cancelled and a new certificate was issued in the name of the defendant and the defendant executed the note sued on to J. E. Reed and both note and stock certificate were left with the bank.

The defendant having thus become a stockholder was elected, director instead of Eeed and qualified as sncb and served from February, 1897, to October of tbe same year; tlien tbe bank suspended. Tbe defendant took part as director in tbe bank management, was present at tbe meetings and received pay for bis services as director. This note and stock certificate were found with tbe assets of tbe bank, marked as collateral to Eeed’s indebtedness and bad been reported- as part of tbe bank assets during tbe year tbe defendant served as director. Tbe defendant testified that all this was only a formal arrangement and that it was understood and agreed at tbe time tbe note was signed by him and left with tbe president of tbe bank that payment of bis note should never be enforced, and that tbe stock was left with tbe bank as the property of Eeed. Tbe president of tbe bank testified that there was no such arrangement, but that Eeed sold his stock to tbe defendant who executed tbe note sued on, pledging tbe stock issued to ,him to secure bis note and that both note and stock were placed by Eeed with tbe bank as collateral for Eeed’s indebtedness.

On issues submitted tbe jury rendered a verdict that tbe bank was tbe owner of tbe note and that it agreed at tbe time tbe note was executed that tbe defendant should not be liable thereon, as alleged in the answer. On tbe rendition of the verdict tbe plaintiff moved for judgment for tbe amount of tbe note and interest, which was refused and tbe plaintiff excepted. There was judgment for tbe defendant and tbe plaintiff excepted and appealed.

Charles E. Jones for the plaintiff.

Moore & Rollins for tbe defendant.

Hoke, J.

The court is unable to perceive anything in tbe allegations or testimony which shows or tends to show a valid defense to this demand. It appears from the answer and tbe evidence that tbe defendant executed tbe note sued on to bis father-in-law, J. E. Reed, for bis stock in the bank and received the consideration. By virtue of bis agreement and the note the defendant became a stockholder in the bank, qualified and served as 'a director, taking part in the bank’s management and receiving pay for bis services. During tbat time, this note was reported as part of the assets of the bank and the jury bave decided tbat same belonged to the bank. Tlie only defense attempted amounts in substance to this: Tbat tbougb the defendant executed bis note and received a valuable consideration for same, there was an understanding and agreement at the time that payment should never be enforced or demanded. All the authorities are agreed tbat such a defense is not open to the defendant. In Meekins v. Newberry, 101 N. C., 18, it was said by Merrimon, J.: “It is a settled rule of law tbat when the parties to a contract reduce the same to writing, in the absence of fraud or mutual mistake properly alleged, parol evidence cannot be beard to alter or contradict or modify it.”

And by Smith, C. J., in Ray v. Blackwell, 94 N. C., 10, “It is a settled rule, too firmly established in the law of evidence to need a reference to authority in its support, tbat parol evidence will not be beard to contradict or alter the terms of a contract put in writing and all contemporary declarations and understandings are incompetent for such purpose.” “Tbe cases,” said the Chief Justice, “which are apparently to the contrary do not contravene this rule, but rest upon the idea that the writing does not contain the contract but is part execution of it.” Tbe decisions here and elsewhere are uniformly to the same effect. Moffitt v. Maness, 102 N. C., 457; Nickelson v. Reves, 94 N. C., 559; Bank v. Tisdale, 84 N. Y., 655; Hirsch v. Oliver, 91 Ga., 554; Forsythe v. Kimball, 91 U. S., 291.

The principle is so familiar tbat citation of authority is not required, but tbe decisions are noted by reason of tbe marked similarity of some of them to tbe case before us.

The jury having ¡declared by their verdict on the first issue that plaintiff is the owner of the note sued on and there being nothing in the further defense or the testimony which tends to establish a legitimate defense, the court is of opinion that the plaintiff is entitled to a judgment for the note and interest notwithstanding the verdict on the second issue and his motion to that effect should have been allowed. Ward v. Phillips, 89 N. C., 215; Corp. Com. v. Railroad, 137 N. C., 1.

Let this be certified to the end that judgment be entered in favor of plaintiff for the note and interest.

Error.