{
  "id": 8523808,
  "name": "THE NORTHWESTERN BANK v. J. DOUGLAS MORETZ",
  "name_abbreviation": "Northwestern Bank v. Moretz",
  "decision_date": "1982-04-06",
  "docket_number": "No. 8111DC707",
  "first_page": "710",
  "last_page": "713",
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    "id": 14983,
    "name": "North Carolina Court of Appeals"
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    "name_long": "North Carolina",
    "name": "N.C."
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      "cite": "226 N.C. 667",
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      "cite": "302 N.C. 222",
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      "year": 1980,
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    {
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  "analysis": {
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  "last_updated": "2023-07-14T17:44:21.707745+00:00",
  "provenance": {
    "date_added": "2019-08-29",
    "source": "Harvard",
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  "casebody": {
    "judges": [
      "Judges MARTIN (Robert M.) and MARTIN (Harry C.) concur."
    ],
    "parties": [
      "THE NORTHWESTERN BANK v. J. DOUGLAS MORETZ"
    ],
    "opinions": [
      {
        "text": "WHICHARD, Judge.\nPlaintiffs complaint demanded judgment against defendant for the balance due on a promissory note. Defendant\u2019s answer pleaded, inter alia, that the note was delivered subject to a condition precedent that plaintiff would \u201cpursue every possible effort\u201d to collect the sum due from one Clyde Baker by prosecuting Baker for giving plaintiff a worthless check in payment of the sum due; and that plaintiff had willfully failed to fulfill the condition precedent, thereby relieving defendant of any obligation.\nPlaintiffs evidence showed the following:\nClyde Baker applied to plaintiff for a loan to enable him to purchase defendant\u2019s automobile. Plaintiff initially denied the application, but subsequently approved it upon defendant\u2019s cosigning Baker\u2019s note. Baker thereafter gave plaintiff a worthless check in purported payment of the note. Defendant thereupon executed the note at issue in payment of the original note.\nActing on defendant\u2019s advice, plaintiff instituted criminal charges against Baker on the worthless check. On request of plaintiffs home office legal counsel, however, an officer of plaintiff thereafter informed the prosecuting attorney by letter that plaintiff had no further interest in the prosecution, because it had been paid in full by defendant as endorser.\nDefendant\u2019s evidence showed the following:\nDefendant signed Baker\u2019s note to enable Baker to secure funds with which to purchse defendant\u2019s automobile. When an officer of plaintiff advised defendant that Baker had given plaintiff a worthless check in purported payment of the note, and that the note was in default, defendant executed a new note to plaintiff. Defendant told plaintiff\u2019s officer he would sign the new note if plaintiff would \u201ccontinue after Clyde Baker . . ., because he [was] the one that ought to have to pay it.\u201d Defendant received no new money for signing the new note, and the new note \u201cwas delivered . . . on the condition that [plaintiff] continue to proceed after Clyde Baker.\u201d The condition was \u201ca verbal condition or understanding\u201d which defendant reached with plaintiffs officer prior to signing the new note.\nDefendant subsequently learned of the letter from plaintiffs officer to the prosecuting attorney, which stated that the original note had been paid in full by the endorser and that plaintiff thus had no further interest in the prosecution. He also learned that plaintiffs local counsel had represented Baker on the worthless check charge and had told plaintiff\u2019s officer that plaintiff \u201cdid not want to be in the position of prosecuting someone on a bad check under those circumstances.\u201d\nThe jury found that the second note was conditioned upon plaintiffs prosecuting Baker for the worthless check and for his default on the note; and that plaintiff, through its officer\u2019s conduct, breached the condition precedent. Judgment was accordingly entered for defendant, and plaintiff appeals.\nPlaintiffs sole contention is that the court erred in denying its motions for directed verdict and judgment notwithstanding the verdict. We find no error.\nPlaintiff met its initial burden of proof by introduction of the note at issue, the signing of which was admitted in defendant\u2019s answer and his evidence. \u201cWhen signatures are admitted or established, production of the instrument entitles a holder to recover on it unless the defendant establishes a defense.\u201d G.S. 25-3-307(2) (emphasis supplied). See Wolfe v. Eaker, 50 N.C. App. 144, 272 S.E. 2d 781 (1980), disc. rev. denied, 302 N.C. 222, 277 S.E. 2d 69 (1981). Upon introduction of the note, then, the burden of proof shifted to defendant to establish a defense.\nOne not a holder in due course takes a note subject to the defense of non-performance of any condition precedent. G.S. 25-3-306(c). A holder in due course takes a note free from \u201call defenses of any party to the instrument with whom the holder has not dealt.\u201d G.S. 25-3-305(2) (emphasis supplied). All the evidence indicates, and plaintiff does not dispute, that plaintiff dealt directly with defendant. It thus, regardless of whether it was a holder in due course, took defendant\u2019s note subject to any defense he could establish of non-performance of a condition precedent.. Delivery of a note upon a condition which failed may be shown by parol evidence. See Perry v. Trust Co., 226 N.C. 667, 40 S.E. 2d 116 (1946); Galloway v. Thrash, 207 N.C. 165, 176 S.E. 303 (1934); Thomas v. Carteret County, 182 N.C. 374, 109 S.E. 384 (1921).\nThe motions for directed verdict and judgment notwithstanding the verdict presented the question whether the evidence of defendant\u2019s alleged defense of delivery subject to an unfulfilled condition precedent was sufficient to entitle him to have a jury pass on it. If there was \u201cany evidence more than a scintilla\u201d to support prima facie establishment of the constituent elements of the defense, the motions were properly denied. Hunt v. Montgomery Ward and Co., 49 N.C. App. 642, 272 S.E. 2d 357 (1980), and authorities cited.\nDefendant testified that he told plaintiffs officer he would sign the new note if plaintiff would \u201ccontinue after Clyde Baker,\u201d and that the new note was delivered to the officer on the condition that plaintiff \u201ccontinue to proceed after Clyde Baker.\u201d He also testified regarding the letter from plaintiffs officer to the prosecuting attorney which stated that the original note had been paid in full by the endorser and that plaintiff thus had no further interest in the prosecution. The letter itself was admitted into evidence as an exhibit. The prosecuting attorney testified that he in fact prosecuted the criminal case against Baker, and that he in fact received the letter.\nThis evidence presented questions of fact for the jury as to whether the note was delivered subject to a condition precedent, and whether plaintiff had fulfilled the condition. The motions for directed verdict and judgment notwithstanding the verdict thus were properly denied.\nPlaintiff contends the motions should have been granted, because there was no evidence that the letter from its officer to the prosecuting attorney affected the judgment in the criminal prosecution against Baker. The test of fulfillment of the condition was not the ultimate judgment against Baker, however, but what plaintiff did or failed to do to secure a judgment requiring Baker to pay the sum due. The contention thus has no merit.\nPlaintiffs further contentions that (1) the conditional delivery defense constitutes use of criminal process to enforce payment of a civil obligation, and is thus violative of 'N.C. Const, art. I, \u00a7 28, and (2) the conditional delivery defense is unavailable to defendant because he is an attorney and is thus prohibited by DR7-105, Code of Professional Responsibility, from presenting criminal charges solely to obtain an advantage in a civil matter, are equally without merit.\nNo error.\nJudges MARTIN (Robert M.) and MARTIN (Harry C.) concur.",
        "type": "majority",
        "author": "WHICHARD, Judge."
      }
    ],
    "attorneys": [
      "James E. Holshouser, Jr., and Love & Wicker, P.A., by Dennis A. Wicker, for plaintiff appellant.",
      "Moretz & Moore, by J. Douglas Moretz and G. Hugh Moore, Jr., for defendant appellee."
    ],
    "corrections": "",
    "head_matter": "THE NORTHWESTERN BANK v. J. DOUGLAS MORETZ\nNo. 8111DC707\n(Filed 6 April 1982)\n1. Uniform Commercial Code \u00a7 31\u2014 direct dealing with party to instrument \u2014 defense of non-performance of condition precedent\nWhere all the evidence indicated that plaintiff dealt directly with defendant, plaintiff took defendant's note subject to any defense defendant could establish of non-performance of a condition precedent. G.S. 25-3-305(2).\n2. Bills and Notes \u00a7 19; Uniform Commercial Code \u00a7 29\u2014 failure of condition precedent \u2014 parol evidence\nDelivery of a note upon a condition which failed may be shown by parol evidence.\n3. Bills and Notes \u00a7 20; Uniform Commercial Code \u00a7 32\u2014 action on note \u2014 nonperformance of condition precedent \u2014 jury question\nIn an action to recover the balance due on a promissory note, the evidence presented questions of fact for the jury as to whether the note was delivered subject to a condition precedent that plaintiff would \u201cpursue every possible effort\u201d to collect the sum due from a third party by prosecuting the third party for giving plaintiff a worthless check in payment of the sum due and whether plaintiff had fulfilled such condition.\nAPPEAL by plaintiff from Christian, Judge. Judgment entered 11 February 1981 in District Court, LEE County. Heard in the Court of Appeals 9 March 1982.\nJames E. Holshouser, Jr., and Love & Wicker, P.A., by Dennis A. Wicker, for plaintiff appellant.\nMoretz & Moore, by J. Douglas Moretz and G. Hugh Moore, Jr., for defendant appellee."
  },
  "file_name": "0710-01",
  "first_page_order": 742,
  "last_page_order": 745
}