ADAMS et al. v. THURMOND.

ADAMS et al. v. THURMOND.
1915 OK 466
149 P. 1141
48 Okla. 189
Case Number: 4589
Decided: 06/15/1915
Supreme Court of Oklahoma

ADAMS et al.
v.
THURMOND.

Syllabus

¶0 1. BILLS AND NOTES--Negotiable Instruments Act-- Application. Rev. Laws 1910, section 4049 (the negotiable instrument law) reading: "The provisions of this chapter do not apply to negotiable instruments made and delivered prior to the passage hereof"--will be construed to mean that it was not intended to make any instrument negotiable which was not negotiable prior to the act.
2. SAME--Bona Fide Purchaser-- Nonnegotiable Note--Defense. A nonnegotiable note, transferred to an innocent purchaser, before maturity, and for a valuable consideration, is still subject to all the defenses which might be interpose against the note in the hands of the payee.
3. SAME--Negotiability--Attorney's Fee. As the law was prior to the passage of the negotiable instrument law (Sess. L. 1909, c. 24), a provision for an attorney's fee in a note rendered it nonnegotiable.
4. SAME--Delivery--Condition. A promissory note may be delivered conditionally, and this may be accomplished by a delivery to the payee himself, with proper agreement as regards the conditions.
5. EVIDENCE--Parol Evidence--Conditional Delivery. Parol evidence is not admissible to vary the terms of a written contract, but the rule is equally well settled that parol evidence may be given to prove a separate parol agreement constituting a condition precedent to the attaching of any obligation under the written instrument.

H. A. Ledbetter, for plaintiffs in error.
W. I. Cruce, for defendant in error.

DEVEREUX, C.

¶1 The first question presented is, was the note negotiable? The note is dated March 29, 1909, and is governed by the law as it existed prior to the enactment of the negotiable instrument law (chapter 49, Rev. Laws 1910). This act was passed at the session of the Legislature of 1909, and contained no emergency clause, and was therefore not in effect when these notes were given. It is provided by section 4049, Rev. Laws 1910:

"The provisions of this chapter do not apply to negotiable instruments made and delivered prior to the passage hereof."

¶2 We think the meaning of this section is that it was not intended to make any instrument negotiable by the act which was not negotiable prior thereto, but, however this may be, the Legislature had no power to make a nonnegotiable instrument, executed and delivered before the act was passed, negotiable under the act, because article 1, sec. 10, of the Constitution of the United States provides, among other things, that no state shall pass any law impairing the obligation of a contract. In Edwards v. Kearzey, 96 U.S. 595, 24 L. Ed. 793, it is said:

"It is also the settled doctrine of this court that the laws which subsist at the time and place of making a contract enter into and form a part of it as if they were expressly referred to or incorporated in its terms. This rule embraces alike those which affect its validity, construction, discharge, and enforcement."

¶3 It has been settled that the decisions of state courts of last resort, establishing what the law is at the time a contract is entered into, becomes a part of its obligation, and therefore protected by the Constitution of the United States (article 1, sec. 10), and its obligation cannot be impaired by any subsequent act of the Legislature or decisions of the courts altering the construction so placed upon the law. Gelpcke v. City of Dubuque, 1 Wall. 175, 17 L. Ed. 530; Muhlker v. N.Y. & Harlem R. Co., 197 U.S. 544, 25 S. Ct. 522, 49 L. Ed. 872. Under these authorities the Legislature certainly would have no power, even had it attempted to do so, to render a note, nonnegotiable when it was given, negotiable afterwards. We think this too clear to require further consideration. Under the law as it existed when these notes were executed, provision for an attorney's fee rendered the note nonnegotiable. Cotton v. John Deere Plow Co., 14 Okla. 605, 78 P. 321; Clevenger v. Lewis, 20 Okla. 837, 95 P. 230, 16 L. R. A. (N. S.) 410, 16 Ann. Cas. 56; Clowers v. Snowden, 21 Okla. 476, 96 P. 596. It has also been settled by the decisions of this court that a nonnegotiable note in the hands of an innocent purchaser for value is subject to the same defense as if owned by the original payee. Randall Co. v. Glendenning, 19 Okla. 475, 92 P. 158; Clowers v. Snowden, 21 Okla. 476, 96 P. 596. The question is therefore presented whether, under all of the evidence in this case, the plaintiffs in error have any defense against the payee in the note, Brashears. The plaintiff in the court below introduced no evidence, except the notes. The defendants introduced evidence, which is set out in the statement of facts, tending to show that the note was delivered to Brashears upon a condition, that is, that it was not to be paid until the title to the land was settled and the present plaintiffs in error were put in possession. In Horton v. Birdsong, 35 Okla. 275, 129 P. 701, it is held:

"A promissory note may be delivered conditionally, and this may be accomplished by delivery to the payee himself, with proper instructions in relation to the conditions."

¶4 In the opinion of that case it is said:

"As the note in controversy was delivered to the payee upon condition that he sign the bill of sale accompanying it and return the same to the maker of the note, and the condition was not complied with, it follows that it was error for the court to enter judgment upon the note against the defendant."

¶5 In Tovera v. Parker, 35 Okla. 74, 128 P. 101, it is said:

"The authorities hold that where the maker of a note delivers it to the payee with the agreement that it shall not take effect until the happening of a certain contingency or the performance of a certain condition, and where neither the contingency has occurred nor the condition been performed, the note never became operative; and an action thereon by the payee or his assignee with notice cannot be maintained." See, also, Farmers' Bank of Roff v. Nichols, 25 Okla. 547, 106 P. 834, 138 Am. St. Rep. 931, 21 Ann. Cas. 1160.

¶6 In Gamble v. Riley, 39 Okla. 363, 135 P. 390, it is said:

"A promissory note may be delivered conditionally, and this may be accomplished by delivery to the payee himself, with proper instructions in relation to the condition. It is elementary that parol evidence is inadmissible to contradict or vary the terms of a valid written instrument. But the rule is almost equally well settled that parol evidence may be given to prove the existence of any separate parol agreement constituting a condition precedent to the attaching of any obligation under the written instrument; that is, not to vary the terms of a written instrument, but to prove that no contract was ever made; that its obligation never commenced."

¶7 The same principle is decided in Humphrey v. Timken Carriage Co., 12 Okla. 413, 75 P. 528, Jones v. Citizens' State Bank, 39 Okla. 393, 135 P. 373, and Harris v. Clanton, 46 Okla. 183, 148 P. 683. We cannot distinguish the case at bar from the above-cited cases. The defendant in error relies upon the case of Colbert v. First National Bank of Ardmore, 38 Okla. 391, 133 P. 206, but that case is distinguishable, because the evidence offered in that case was not to show that there was a condition attached to the notes, but that the note was not to be paid in any event. This distinction is clear. In the case at bar it is not attempted to show that the notes were not to be paid under any circumstances, but only that they were delivered on the condition that they were not to be paid until the title to the land was settled and the plaintiffs in error placed in possession thereof. In the Colbert case the evidence offered and rejected was that under no circumstances was the maker of the note to become liable. We therefore recommend that the judgment be reversed and the cause remanded for further proceedings not inconsistent with this opinion.

¶8 By the Court: It is so ordered.