Hubacek v. Ennis State Bank

Mr. Justice Norvell,

joined by Justice Smith and Chief Justice Hickman, dissenting.

No one will dispute that when a final version of a contract has been agreed upon, prior negotiations and even prior agreements become immaterial. And this is true whether the final agreement be oral or in writing. However, the parol evidence rule comprehends something in addition to this familiar doctrine or merger in that written evidence, because of its greater reliability, is given controlling effect in determining the terms of the contract which will be judicially enforced in those instances where there is a conflict between a written contractual provision an an alleged oral stipulation. The rule is in part based upon public policy considerations favoring the sanctity of written agreements.

*176 This is made clear by quotations, from recognized, text authorities: ■ .

“The parol evidence rule is a reasonable, and most salutary one, and it should be strictly adhered to. It is founded on experience and created by necessity, and it is designed to give certainty to a transaction which has been reduced to writing by protecting the parties against the doubtful veracity of interested, and uncertain memory of disinterested, witnesses: The rule is founded oh the long experience that written evidence is so much more certain and accurate than that which rests in fleeting memory only, that it would be unsafe,' when parties have expressed the terms of their contract in writing, to admit weaker evidence to control and vary the stronger and to show that the parties intended a different contract from that expressed in the writing signed by them. It is obvious that written instruments would soon come to be of- little value if their explicit provisions could be varied, controlled, or superseded by parol evidence, and it is also plain that a different rule would greatly increase the temptations to commit perjury; the courts have expressed regret that in their anxiety to avoid possible injustice in particular cases, they have been gradually construing away a principle which has always been considered one .of the greatest barriers against fraud and perjury. * * *

“While the rule does not depend on, it is analogous to, and rests on substantially the same principle, as the statute of frauds.” 32 C.J.S. 787-8, Evidence, sec. 851.

“The rule then has two effects (a) where there has been an apparent written integration of the transaction, and this apparent focusing óf thé negotiation in one instrument was actually intended by the actor, or actors, this intention is effectuated by ignoring the previous expressions which were thus finally rejected by the parties, and (b) where there has been an apparent integration in writing, as gathered from the. writing and the surrounding situation, but in fact as-appears from the other expressions of the parties it was not so intended, and other agreements or dispositions were intended also to be effective, these other intentions and expressions will nevertheless be disrgarded provided they were such as in the judge’s1 opinion would normally have been incorporated in the writing. This latter effect, which is the only part of the rule which could be drawn in question, must obviously be -justifiable, if at all, as- a device to stabilize and effectuate apparently complete written transactions in general by preventing the use of other expres *177 sions of the parties to alter.or extend their ifect, not only in those cases, by far the most numerous, when it was actually so intended, but even in the exceptional cases .where the parties’ intentions,, despite the form, of their writing, was otherwise.” 2 McCormick & Ray, Texas Law of Evidence (2d Ed.) 447, sec. 1602.

The point here is a narrow one and may be stated as follows :

Does the oral agreement alleged by Hubacek contradict the written obligation evidenced by his unqualified endorsement of the notes upon which his cross action is based?

This is not a case in which promissory notes have been endorsed, handled and collected in accordance with a written contract of the parties. In such a case, we would have the problem of arriving at the ultimate integrated agreement of the parties by considering the written instruments in accordance with recognized rules of construction and evidence. Perhaps in certain instances, it would be necessary to consider parol evidence to resolve ambiguities, but this is not the same as contradicting by parol the only written record of' the agreement which we have, namely, the unqualified endorsement of a promissory note.

Hubacek in effect says that he delivered to the bank a note for $100 (for example) signed by John Doe, payable to Hubacek and bearing interest at the rate of ten per cent peT annum. He endorsed the note without qualification and thereby became bound to pay the same according to its tenor. Section 66, Negotiable Instruments Acts, Article 5936, sec. 66, Vernon’s Texas Civ. Stats., 32 C.J.S. 788, sec. 852. Then when at the end of one year the note is paid in full, together with $10.00 in interest, Hubacek asserts that he is entitled to $2.00 of the interest so paid. Had John Doe, the maker, not paid the note on maturity, Hubacek would have owed the bank the sum of $110. He could not discharge this obligation by .paying the bank $108 or; what amounts to the same thing, by paying the bank $110 and receiving $2.00 as a rebate.

The fact that more than one note was involved and the rebate was not payable until after all the notes were paid does not change the situation any more than saying that Hubacek was entitled to compensation for collecting a note which he was legally bound to pay, ,

*178 In Godwin v. Kerns, 178 Va. 447 , 17 S.E. 2d 410 , the directors of the bank executed notes to make good an impairment of capital stock. When sued, they pleaded an oral agreement that any amounts collected upon notes which had been taken from the capital accounts by order of the bank examiners should be credited upon the directors’ notes. The Supreme Court of Appeals of Virginia rejected the attempted offset, holding that:

“To allow it to be shown by parol evidence that the note was to be paid or reduced by payments made to the holder from other securities held by the holder, or to be paid or reduced in value upon the happening of any subsequent event not mentioned in the note itself, would be to alter, vary, and contradict the express terms of a written contract.”

Similar holdings are found in Kelley v. Thompson, 175 Mass. 427 , 56 N.E. 713 ; Hass v. Meyer, 118 Kans. 109 , 233 Pac. 1021 and Jensen v. Siegfried, 263 N.W. 715 . Cf. Chalk v. Daggett, Texas Com. App., 257 S.W. 228 ; Robert & St. John Motor Co. v. Bumpass, Texas Civ. App., 65 S.W. 2d 399 , writ dism.

Being of the opinion that the judgment of the Court of Civil Appeals should be affirmed, I respectfully dissent from the order of reversal.

Opinion delivered October 8, 1958.

Rehearing overruled Nov. 12, 1958.