Mitzel Co. v. Shields (35 Ohio App. 514, 1930)

Vickery, P. J.

This action comes into this court on a petition in error to the municipal court of the city of Cleveland, in which court the defendant in error, Burt E. Shields, was plaintiff, and brought an action upon a promissory note signed by Adam J. Mitzel, as maker, made payable to Burt E. Shields, as payee, and indorsed upon the back as follows: “As per agreement, The Mitzel Company. By A. J. Mitzel, Pres.”

The action in the court below was started by filing a statement of claim in the short form, a copy of the note and the indorsements thereon being embodied in the statement of claim, and it showed that the note was past dne. Suit was brought by the original payee, and a judgment was asked for the amount of the note by the payee and holder of said note. Service of summons was made upon Adam J. Mitzel and the Mitzel Company, and they filed a statement of defense, which went into the transaction at some length, and alleged, in substance, that this note, while given at the date mentioned in the note and for the time and amount stated, yet was given under and with the distinct understanding and agreement that the note, although the date was mentioned, was not to become due and payable until the happening of certain events, that is, until certain business transactions had been completed in Elyria, Ohio, where the Mitzel Company had some dealings; and further alleged that the agreement was contemporaneous with and an inducement for the giving of the note, that, although complete in form, the note was not to be due and payable until the events set up in the contemporaneous verbal agreement had been complied with. Defendants then went on to allege, in their statement of defense, that the job or work which was to be completed before the note became due had not been completed, and was still unsettled and unadjudicated, and therefore the note was not due, and they asked for dismissal of the action.

To this statement of defense a demurrer was filed, which demurrer was sustained by the municipal court, and leave to amend the statement of defense was allowed. Subsequently, within rule, an amended statement of defense was filed, whereupon a motion was made to strike the amended defense from the files because the order of the court had not been complied with, which motion was granted, and the amended defense was stricken from the files, whereupon the court entered judgment for the full amount of the note and interest, to reverse which judgment error is prosecuted here.

It would seem, at first blush, that this answer invoked the rule against varying a written contract by parol testimony, and apparently that is the view which the court took of it; in other words, that the defense set up in the statement of defense would, in effect, destroy the instrument by the introduction of testimony of the parol contract that was made at the time the instrument was given, and therefore did not state a defense, inasmuch as the things set up in the statement of defense and the amended statement of defense could not be introduced in evidence and would not be a defense.

It must be remembered that this action was between the original parties to this paper, the maker of it and the payee of it, and the indorsement on the back of it intimates that there was an agreement before the indorsers would indorse this paper, for it says, “according to agreement.” Now the pleading set up that this oral agreement was made as an inducement concurrently with the execution of the note. We are well informed of the rule that one cannot vary or change a written obligation, either to enlarge or to detract from it, by parol testimony made before or at the time of the making of the paper. But there are some exceptions to this rule. One of the exceptions is that a note or contract complete on its face in every detail, signed and delivered, might be shown not to be operative until the happening of something in the future. Now this does not change or vary the terms of a written instrument. It simply goes to the effect that, although the instrument is complete in its make-up, and for all intents and purposes so far as may appear it is a complete instrument, yet, by the agreement that was made concurrently with it as an inducement for the making of the contract, it was understood and agreed that this was not as a matter of fact to be a contract between the parties until the happening of some event in the future.

In this case, apparently, according to the statement of defense, this paper writing purporting to be a note complete in every detail was not to be enforceable until the happening of something which was to take place in the future. Now it was not attempted, by this pleading, to vary the terms of this note, but only to show as a matter of fact that, though complete in form, it was not enforceable as a note, because at the time the suit was brought the event that was the basis of the agreement had not taken place. Now, I say, this is one of the exceptions to the oral testimony rule, and, if one analyzes it, it is perfectly logical and sound, because, as already stated, it does not change or vary the terms of the writing in the least. It is admitted that this writing was given. It is admitted that it is complete ; but by virtue of the agreement it did not become actionable between the parties until the happening of an event in the future, which was set up in much detail in the statement of defense.

Now it must be borne in mind that the rule might have been entirely different had this paper been indorsed either in blank, or to a specific indorsee who had no knowledge of the agreement, before the note had become due, for a valuable consideration, for, being complete upon its face, if an innocent holder had come into the picture he would have been protected against the agreement that existed between the original parties. But that rule does not obtain when the suit is brought between the original parties. Any defense, legal or equitable, that exists between the parties may be interposed as a reason why a judgment should not be taken upon the paper against the parties liable upon the same.

In this case it was this agreement that was a defense, and, as between the maker and the indorsee of this paper, on the one side, and the payee on the other, that was a complete and proper defense, and, as already stated, it did not impair or change the contract in the least, and we think that the statement of defense set up a complete defense at that time to the enforcement of this obligation, and we think the court erred in sustaining the demurrer to the first statement of defense, and we further think the court erred in striking off the amended statement of defense. It would therefore follow that the court erred in rendering judgment upon this note against the maker and the indorser, and for these errors the judgment of the municipal court will be reversed and the cause remanded to the municipal court, with instructions to overrule the demurrer, or demurrers, and the motion or motions to strike off, for the statement of defense and the amended statements of defense each set up a good defense as between the parties to this note’s enforcement at the time it was sought to be enforced, if, as a matter of fact, the allegations set np in the statements of defense could be proven, but that is a matter to which evidence should be addressed.

Therefore the court erred, and the judgment will be reversed and the cause remanded to the municipal court.

Judgment reversed and cause remanded.

Levine, J., concurs.

Sullivan, J., not participating.