Negotiable Instruments—Conditional Delivery—Admissibility of Parol Evidence to Show Condition Subsequent under Section 16 of N.I.L.—Admissibility of Parol Evidence to Show Collateral Agreement

An itinerant carnival worker gave a note to a used car dealer for the balance of the price of a house trailer. The dealer indorsed the note to plaintiff who sued the dealer as indorser upon default of the carnival worker. The dealer offered evidence that before taking the note he made an oral agreement with the manager of plaintiff’s branch office to indorse the note with recourse on condition that plaintiff would return the trailer to his car lot before requiring him to pay the note. This agreement was made to facilitate acceptance of the note by plaintiff’s home office.

Plaintiff did not return the trailer. Held: the oral agreement to return the trailer was a condition subsequent and inadmissible under the parol evidence rule. Section 16 of the Negotiable Instruments Law provides that “every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties . . . the delivery may be shown to have been conditional or for a special purpose only, and not for the purpose of transferring the property of the instrument.”