Bills and Notes

The Parol Evidence Rule as Applied to Bills and Notes. The Tennessee Supreme Court case of Lazarov v. Klyce' presented the problem of when an agent who has signed a negotiable instrument can use parol evidence to exonerate himself from personal liability on the instrumentat the suit of the payee. The payee of a note sued the defendant, Arnold Klyce, to hold him individually liable on the note of a corporation of which defendant was an officer. The defense was that the note was an obligation of the corporation, that defendant signed as an officer of the corporation and that he incurred no personal liability on the instrument.

The signatory part of the note was as follows: "Independent Tool & Machine Co.", "By J. W. Clements," "Arnold Klyce". Over the objection that defendant's oral proof showing his representative capacity violated the parol evidence rule, defendant was permitted to prove that he signed only as an agent; and the jury found a verdict for defendant. The chancellor set the verdict aside on the ground that the note was clear and unambiguous and that, therefore, parol evidence was improperly admitted. The Court of Appeals reversed on the ground that there was ambiguity surrounding the manner in which defendant's signature appeared on the note and that parol evidence was properly admitted to clear up the ambiguity.

The Supreme Court reversed the Court of Appeals and affirmed the decree of the chancellor.