Paulson v. Boyd

SiebeckeR, J. At the trial the defendant Boyd relied upon an agreement between him and Ellis, the payee in the note given by the defendant. The transaction between the defendant and Ellis for the purchase of mining stock is admitted by Ellis to have constituted the agreement for which the notes were given. The primary question is: What was the parol agreement between these parties? The evidence of it is not voluminous or contradictory, and is, in effect, that Ellis undertook to assist Boyd in securing the advantages of an interest in a mine, if it should prove a profitable enterprise at the expiration of eighteen months. To accomplish this Boyd contracted for the purchase of some mining stock from Ellis at an agreed price of $2,500 upon the following arrangement: Since Boyd had no available means to-make such a purchase, Ellis made him an offer for such purchase, under which Bpyd was to give him a note for the amount, which Ellis was to carry and renew for eighteen months. If the stock had not then realized enough to pay the purchase price and Boyd did not then want the stock, then Ellis was to take it off his hands and cancel the note. The stock realized nothing, and Boyd insists that, under the parol agreement with Ellis at- and before the delivery to Ellis [247] of the first note, the notes never went into effect as completed contracts. He contends that.he was to have the right at the expiration of eighteen months to elect whether he wanted the stock. We are of the opinion that the facts sustain this claim and show such an agreement between the parties. An examination of the evidence, in view of the relations of the parties and the considerations which induced him to make and deliver the note, leads us to the conclusion that it was not intended and agreed by them that'the note should be a present binding agreement, but that it was delivered to Ellis upon the condition that if Boyd paid interest on the-sum for eighteen months Ellis was to renew the notes as agreed, and if at the expiration of that time Boyd did not want the stock the agreement to purchase was to be terminated at Boyd's election and the note canceled. The significance of the terms of the transaction, as shown by the evidence of the situation, is that Boyd had the right at the expiration of eighteen months to elect whether he would accept a transfer of the stock at the price fixed and evidenced by the note. The elements of the agreement constitute an arrangement under which the note delivered to Ellis did not become a completed contract m prcesenti, but was to take effect as a completed contract only in the event that Boyd, under the agreement, elected to take a transfer of the stock within the time agreed on. Such oral agreements are not contradictory of the written instrument. This rule was declared and fully discussed in the recent case in this court of Hodge v. Smith, 130 Wis. 326, 110 N. W. 192, where it was held: “It is familiar law, notwithstanding some conflict in the authorities, that a person may manually deliver an instrument, though it be in the form of commercial paper, to another, on its face containing a binding obligation in prce-senti of such person to such other, with a contemporaneous verbal agreement that it shall not take effect until the happening of some specified event, and that the paper, as be [248] tween the parties, will have no validity as a binding contract till the condition shall have been satisfied; and that proof of such-condition does-not violate the rule that a written instrument cannot he varied by a contemporaneous parol agreement; that such evidence only goes to show that the instrument never had vitality as a contract” — citing cases. It is there also held that this principle is recognized in the Negotiable Instrument Law (sec. 1675 — 16, Stats.: Supp. 1906) by providing that: “Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties, and as regards a remote party other than a holder in due course, . . . delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument.” In the case of Burke v. Dulaney, 153 U. S. 228, 14 Sup. Ct. 816, the circumstances of the transaction are in their main features very like the instant case, and it was held by the court that a note covering the price for the sale of property by the payee to the maker, which had been delivered under an oral agreement between the parties to the effect that the note should represent the price if the maker should determine to retain the interest in a mine after having worked and inspected it, under such circumstances there was not such a delivery of the note as to malee it unconditionally binding upon the obligor according to its terms, but it was delivered to become absolute if the maker elected to take the property under the terms of the oral agreement. Other cases on the subject are State ex rel. Jones v. Chamber of Comm. 121 Wis. 110, 98 N. W. 930; Ware v. Allen, 128 U. S. 590, 9 Sup. Ct. 174; Wilson v. Powers, 131 Mass. 539. The question arises: Can defendant avail himself of this agreement between himself and Mr. Ellis as against the plaintiffs, the receivers of the Security Savings Bank? It is without dispute that the Security Savings Bank became in249 eorporated in August, 1908, and that it obtained this note and other securities from the private bank which Mr. Ellis had conducted prior to its incorporation. .We are of opinion that the evidence is clearly to the effect that the newly incorporated bank obtained the assets, including this note, pursuant to a resolution of the stockholders directing the directors to assume the liabilities of the private bank in consideration of a transfer of the assets of the private bank to the new bank. There is no dispute but that the note obtained by the new bank by such transfer was one given in renewal of the former note given by Boyd to Ellis under the parol agreement for the purchase of the mining stock, and that when this second note matured the bank took the note sued on in renewal of it. There is no evidence tending to show that at the time of the renewal the original agreement was in any way changed or modified. The new notes were taken in place of the first one and represent the original obligation. First Nat. Bank v. Case, 63 Wis. 504, 22 N. W. 833; Gallagher v. Ruffing, 118 Wis. 284, 95 N. W. 117. Can defendant assert this defense to the note in the hands of the new bank? This must be answered in the affirmative in view of the circumstances of the transfer of the assets from the private to the new bank. The condition of the transfer is that the new bank.“assume the liabilities of the private bank ... in consideration of the transfer” of its assets to the new bank. As stated, there is no question but that the transfer was in fact so made. This transfer im- . ports that the new bank received-the assets charged with the conditions to which they were subject in the hands of the priva Le bank, and constitutes an express assumption of all defenses to which they were subject in the hands of the former owner. The note having come into the hands of Mr. Ellis as manager of the private bank, subject to the conditions of the parol agreement with Mr. Boyd, it follows that the new bank holds it subject to the defense that its delivery [250] was conditional, “or for a special purpose only, and not for the purpose of transferring the property in the instrument.” Hodge v. Smithy 130 Wis. 326, 110 N. W. 192. This result renders all other questions discussed by counsel immaterial, and calls for affirmance of the judgment By the Court. — Judgment affirmed.