Terry v. Hammond

Promissory Note—Contemporaneous Agreement as a Defense.—Where, in an action upon a promissory note which was dated November 20th, 1876, and upon its face matured six months after date, the answer alleged that the note was given in payment of a balance of the purchase price of a business sold by the plaintiff to the defendants, and that at the time of 'the making of the note the parties agreed in writing that the payment covered by the note (without mentioning the note) should not bear interest for the first six months, nor be due in fact until eighteen months after date: held, that the defense was valid.

Appeal from the District Court of the Fifth Judicial District, Stanislaus County. Action on a promissory note for five hundred dollars, dated November 20th, 1876, due by its terms six months after date. .The answer admitted the making of the note, but alleged in the subdivisions referred to in the opinion that it was given to cover a payment to be made as part of the purchase price of a business bought by the defendants from the plaintiff; and that at the time of making it a written agreement was entered into by the parties, by which the plaintiff sold his business to the defendants for the sum of eight thousand three hundred and forty dollars and ninety-four cents, which the contract stipulated should be paid ,as follows: “ And the parties of the second part agree to pay the parties of the first part three thousand dollars upon the signing of this contract, and the balance in payments' not to exceed five hundred dollars, (without interest for the first six months) and the first payment shall not be due until eighteen months after date, and to have thirty days’ notice on each and every payment, and from four to six months’ time (between payments) before making another demand, with interest on the same at the rate of one per cent, per month, and with the privilege of buying the building after the expiration of the two years.” The answer also alleged that the note was given at the request of plaintiff to cover the first payment, with the understanding that it should not bear interest for the first six months, and should not be due until eighteen months after date. On motion of the plaintiff the Court struck out subdivisions five and six of the answer, setting up this defense, and the defendant declining to amend, judgment was rendered for plaintiff, whereupon the defendants appealed.