Scott v. Wall

777 P.2d 581, 55 Wash. App. 404
CourtCourt of Appeals of Washington
DecidedAugust 21, 1989
DocketNo. 22403-4-I
StatusPublished
Cited by1 cases

This text of 777 P.2d 581 (Scott v. Wall) is published on Counsel Stack Legal Research, covering Court of Appeals of Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Scott v. Wall, 777 P.2d 581, 55 Wash. App. 404 (Wash. Ct. App. 1989).

Opinion

Winsor, J.

Glenn and Gloria Wall (Wall) appeal an order granting partial summary judgment to Lewis and Janet Scott (Scott) in an action to enforce a promissory note. We reverse.

On May 31, 1986, Wall entered into a contract with Scott to purchase and operate Wall's restaurant. Paragraph 10 of the purchase agreement provided:

This offer is subject to and contingent upon the ability of the purchaser to negotiate an acceptable lease for not less than 3 years ... for the existing location of the restaurant. If such a lease cannot be obtained, this agreement shall be null and void and not binding on purchasers.

The agreement also provided that $15,000 cash was due on closing, with the balance of $45,000 to be paid under a promissory note.

Wall was unable to negotiate a lease by the closing date. According to Wall, Scott was anxious to close the deal and orally promised that if Wall would sign the closing documents, Scott would return the down payment and release Wall from the transaction should Wall fail to subsequently obtain an acceptable lease. Relying on Scott's promise, Wall [406]*406signed the necessary closing documents, including the $45,000 promissory note.

Wall was unable to negotiate an acceptable lease, and after making several monthly installments, defaulted on the note. Scott filed suit seeking, among other remedies, to collect the accelerated amount owing on the note. As an affirmative defense, Wall pleaded that the note and agreement were null and void because no acceptable 3-year lease was negotiated. On Scott's motion for partial summary judgment to enforce the note, the trial court entered judgment for Scott. Wall appeals, contending that the note is not a binding, enforceable obligation because it was delivered conditionally and its enforceability was contingent on Wall obtaining a lease.

Effect of the Uniform Commercial Code on Enforceability

Scott asserts that the note in question stands alone as an unconditional, enforceable, obligation to pay because it meets all requirements of a negotiable instrument under RCW 62A.3-104. Scott also relies on RCW 62A.3-105(2) (a)1 to establish the unconditional nature of the note. This U.C.C. section provides that "[a] promise or order is not unconditional if the instrument . . . states that it is subject to or governed by any other agreement". Scott contends that under RCW 62A.3-105(2)(a), Wall's failure to reference the alleged collateral lease-contingency agreement on the face of the note defeats Wall's contention that the note was delivered conditionally.

Scott misconstrues the issue presented in this case as well as the U.C.C. The issue presented is not whether the note's promise to pay was unconditional, but whether that promise was to become binding only on the occurrence of a certain event, i.e., whether the note was delivered conditionally. The U.C.C. expressly recognizes the defense of [407]*407conditional delivery to an action for payment on a promissory note. RCW 62A.3-306(c) provides:

Unless he has the rights of a holder in due course any person takes the instrument subject to
(c) the defenses of . . . non-performance of any condition precedent, non-delivery, or delivery for a special purpose . . .

Scott is not a holder in due course, see RCW 62A.3-302, and Wall may therefore assert the defense of conditional delivery.

Although no reported Washington case construes RCW 62A.3-306(c), other jurisdictions hold that this section is a summary of pre-U.C.C. rules of contract law. See, e.g., Ventures, Inc. v. Jones, 101 Idaho 837, 623 P.2d 145, 149 (1981) (rule that a note delivered subject to a condition does not become enforceable until the condition is fulfilled, has continued application under the U.C.C.); Evenson v. Hlebechuk, 305 N.W.2d 13, 17 (N.D. 1981) (defense of nonfulfillment of a condition precedent to a promissory note applicable to post-U.C.C. cases). We agree, and therefore hold that the law regarding conditional delivery of a negotiable instrument is not modified by the U.C.C.

Admissibility of Evidence Concerning Conditional Delivery

Washington courts traditionally admit evidence "to show that a negotiable instrument, absolute in form, though delivered to the payee, is not to become a binding obligation except upon the happening of a certain event." Nelson Equip. Co. v. Goodman, 42 Wn.2d 284, 286-87, 254 P.2d 727 (1953); accord, Blaine v. Darwin, 160 Wash. 327, 331, 295 P.2d 131 (1931). Whether a note was intended to be conditional is a question of fact. Vogt v. Hovander, 27 Wn. App. 168, 179, 616 P.2d 660 (1979). Scott seeks to avoid these rules by contending that here, evidence pertaining to the conditional nature of the note at issue is barred by the parol evidence rule. Scott's attempt fails.

[408]*408The parol evidence rule excludes extrinsic evidence that varies or contradicts the terms of a valid, written contract. Truck-Trailer Equip. Co. v. S. Birch & Sons Constr. Co., 38 Wn.2d 583, 590, 231 P.2d 304 (1951); Bond v. Wiegardt, 36 Wn.2d 41, 47, 216 P.2d 196 (1950). The rule applies only when the parties intended the written contract to be a final, integration of their agreement. Emrich v. Connell, 105 Wn.2d 551, 556, 716 P.2d 863 (1986). Thus, in Washington, "a collateral oral agreement limiting the liability of the maker of an unqualified promise to pay, is not available as a defense." Fleming v. August, 48 Wn.2d 131, 133, 291 P.2d 639 (1955). Parol evidence is admissible, however,

to show that a written instrument is not to become a binding obligation except upon the happening of a certain event. Such evidence does not vary or contradict the terms of the written instrument!, but] merely shows what must occur before the agreement is to take effect.

Fleming, at 134. In other words, when conditional delivery is at issue, parol evidence is admissible to determine whether the instrument ever became a binding obligation.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Mortgage Buyers of America v. Wolfman, No. 519778 (Jan. 28, 1994)
1994 Conn. Super. Ct. 993 (Connecticut Superior Court, 1994)

Cite This Page — Counsel Stack

Bluebook (online)
777 P.2d 581, 55 Wash. App. 404, Counsel Stack Legal Research, https://law.counselstack.com/opinion/scott-v-wall-washctapp-1989.