Brief Fact Summary.
. Long Island Trust Company (Plaintiff bank) brought an action to enforce a promissory note for money it loaned to the International Institute for Packaging (Defendant) with five guarantors. Two guarantors, Horowitz and Rochman, claimed the note was unenforceable against them due to the bank’s alleged violation of an oral stipulation that endorsement from all five original guarantors was required to extend the loan.
Synopsis of Rule of Law.
Where the terms of the conditional delivery are not complied would not have been complied with the instrument is unenforceable and parol evidence is admissible to show that the delivery of the instrument to the payee was a conditional delivery.
Horowitz and Rochman allegedly told the bank to “make sure that all the endorsements were on the note,” but the bank failed to have one party endorse it. When the loan was not repaid, the bank instituted this action against International Institute and four of the guarantors.
Horowitz and Rochman contended that their endorsement was conditional on the other signatures, and since the fifth endorsement was not obtained by the bank, the note was unenforceable as to them. The Special Term granted summary judgment to the bank, and the Appellate Division affirmed.
Should Horowitz and Rochman be permitted to present parol evidence to attempt to prove such an agreement, and, if so, would this agreement would bar enforcement of the note as to them?
The Court answered both questions affirmatively, and reversed the order of the Appellate Division and denied summary judgment.
· An agreement that any renewal notes be endorsed by all of the original endorsers is provable by use of parol evidence, and, if proved, would make the note unenforceable against the guarantors whose delivery was conditional upon the procurement of such endorsements.
The Special Term’s decision could be read as supporting a view that would prevent the maker or guarantor of a note held by a bank from ever raising defenses to the note, which is completely contrary to law.
Under the parol evidence rule, the writing contained the terms to the parties’ agreement, and Horowitz and Rochman should not be permitted to present evidence of their alleged oral agreement.
It is not the court’s job to assist banks in their collection matters by rewriting their agreement to remedy omissions by their draftsmen. Parol evidence could properly be submitted by Horowitz and Rochman to show that there was a conditional delivery.