Summary
holding that the parol evidence rule barred the appellant from contending that the appellee had orally agreed to manage the appellant's business for an extended period of time in exchange for a judgment note when such agreement was not included in the note's written terms
Summary of this case from MBB Realty Ltd. Partnership v. Great Atlantic & Pacific Tea Co. (In re Great Atlantic & Pacific Tea Co.)Opinion
March 19, 1970.
October 9, 1970.
Practice — Judgments — Opening — Equitable considerations — Necessity of proving good defense — Appellate review.
The individual defendants, wife defendant, president and sole shareholder of the corporate defendant, and her husband executed a judgment note in favor of plaintiff. The note was apparently given to plaintiff for the purpose of securing his position in connection with defendants as the bartender and manager of a restaurant. The relationships between the parties became unpleasant, each side blaming the other, and plaintiff kept away from the individual defendants and the bar and restaurant.
Plaintiff caused judgments to be entered by confession on the note against defendants. Defendants filed a petition to open judgment, and, after depositions were taken, the court below discharged defendants' rule to show cause. Defendants appealed. The order of the court below was affirmed.
Contracts — Parol evidence rule — Judgment note — Alleged oral agreements — Failure of consideration — Note not to be used as long as there was an outstanding debt owed to particular creditor of corporation — Admission by plaintiff of existence of contemporaneous oral agreement.
Defendants contended that plaintiff had agreed to manage the business of the corporation for an extended period of time, which agreement he violated, thereby creating a failure of consideration for the note in controversy. Defendants also contended that the parties understood that the note was not to be used at all so long as there was an outstanding debt owed to a creditor of the corporation. It was further asserted by defendants that plaintiff admitted the existence of the contemporaneous oral agreement.
Corporations — Officers — Authority — President — Implied authority to sign judgment note — Repudiation of agency by which corporation secured benefit.
Defendants contended that the wife, as president of the corporate defendant had no authority to bind the corporation on the note in controversy. The minutes of a meeting of defendant's board of directors provided that the officers were authorized to execute all security instruments, leases, notes and other documents necessary for the purchase of the business.
Mr. Justice O'BRIEN (speaking for Mr. Chief Justice BELL, Mr. Justice COHEN, and himself) filed an opinion, in which he stated the following:
1. A petition to open a judgment is an appeal to the equitable side of the court, and the petition must establish equitable considerations which convince the court that Justice would best be served by opening the judgment; and the disposition of the petition will not be disturbed on appeal unless a clear abuse of discretion is shown. A petition to open judgment will not be granted unless the petitioner is able to show that he has a good and meritorious defense to the judgment. [434-5]
2. Defendants are barred from proving either of the alleged oral agreements by the parol evidence rule. [435]
Where an alleged prior or contemporaneous oral representation or agreement concerns a subject which is specifically dealt with in the written contract, and the written contract covers or purports to cover the entire agreement of the parties, in the absence of fraud, accident, or mistake, the alleged oral representation or agreement is merged into or superseded by the subsequent written contract, and parol evidence to vary, modify, or supersede the written contract is inadmissible.
The instant case is not within the exception to the parol evidence rule that, where a party seeking to enforce the written instrument admits that the written instrument did not fully and completely state the entire agreement between the parties, parol evidence is admissible to explain and supplement the written instrument. Plaintiff's explanation of the reason why he received the note was not an admission of the existence of a contemporaneous oral agreement; it appears to be merely a statement as to the facts surrounding his receipt of the note.
3. In the circumstances, the president of the corporation had, if not express, certainly implied authority, to execute the note on behalf of the corporate defendant.
Moreover, receipt of the note did induce plaintiff to quit his business, join defendants, and serve as manager of the bar and restaurant for a period of thirteen months. A corporation cannot repudiate the agency by which it secured the benefit it has enjoyed.
Mr. Justice JONES and Mr. Justice POMEROY, concurred in the result.
Mr. Justice ROBERTS filed a dissenting opinion (in which Mr. Justice EAGEN joined), in which he stated the following:
A simple judgment note with a confession clause containing only the unilateral undertaking of the maker cannot be a complete written contract which covers or purports to cover the entire agreement between the parties to the note. The parol evidence rule is irrelevant in the context of this case.
This view is entirely consonant with the general rule that it is always open to prove consideration if none is mentioned, and with the accepted proposition that parol evidence is always competent to show want or failure of consideration.
Before BELL, C. J., JONES, COHEN, EAGEN, O'BRIEN, ROBERTS and POMEROY, JJ.
Appeal, No. 263, March T., 1969, from order of Court of Common Pleas, Civil Division, of Allegheny County, Oct. T., 1965, No. 4165, in case of Vincent Emperee v. Iris Meyers et al. Order affirmed.
Petition to open judgment. Before HESTER, J.
Defendants' rule to show cause why judgment should not be opened discharged. Defendants appealed.
Saul Davis, for appellant.
Joseph W. Conway, with him Edward J. Balzarini, and Suto, Power, Balzarini Walsh, for appellee.
On May 9, 1964, appellant, Iris Meyers, president and sole shareholder of Bar Crescent, Inc. (corporate appellant) and her husband, Samuel Meyers, executed a judgment note in the face amount of $10,000, in favor of the appellee, Vincent Emperee, promising payment one day after date. At the time of the execution of the note, the other two directors of corporate appellant were Stephen J. Harris, Esquire and Louis Simon, who were also treasurer and secretary, respectively, and who were nominees of Tavern Lending Corporation (T.L.C.), a creditor of corporate appellant.
Corporate appellant was formed to purchase and operate a restaurant and bar. Since Iris Meyers had no experience in such a business and her husband was retired, the appellee was employed to be the manager and bartender. Appellee left his own business (he had been the owner of a used car lot) and assumed his duties as manager on a fulltime basis in May of 1964.
According to the attorney who was representing both appellant and appellee, the note was given to appellee "for the purpose of securing his position in connection with [appellants as] the bartender and manager."
However, appellee's position was not secure. According to appellee's version, one evening in July of 1965, appellee and Iris Meyers had a fight, which concerned, among other things, appellee's objection to one of the employees serving liquor after the legal 2 a.m. closing time; appellant Iris Meyers' allegedly drunken, angry response to appellee's objections; appellee's pushing Mrs. Meyers; and Mrs. Meyers having appellee arrested by the township police. Appellee testified that he was later instructed by the justice of the peace never to return to the restaurant.
According to the appellants' version, appellee apparently lost interest in the business after five or six months, and thereafter became verbally abusive and physically abusive to Iris Meyers and the bar customers. All parties agree that since July, 1965, appellee has kept away from the individual appellants and the bar and restaurant.
On September 2, 1965, appellee caused judgment to be entered by confession on the note against the appellants. They filed a petition and obtained a rule to show cause why the judgment should not be opened. After depositions were taken and argument before the court below, an order was entered on July 31, 1969, discharging the appellants' rule to show cause. This appeal was taken from that order.
As we said in Carrier v. Wm. Penn Broadcast. Co., 426 Pa. 427, 233 A.2d 519 (1967): "A petition to open a judgment is an appeal to the equitable side of the court, and the petition must establish equitable considerations which convince the court that justice would best be served by opening the judgment. McDonald v. Allen, 416 Pa. 397, 206 A.2d 395 (1965); Kramer v. Phila., 425 Pa. 472, 229 A.2d 875 (1967); and the disposition of the petition will not be disturbed on appeal unless a clear abuse of discretion is shown. Good v. Sworob, 420 Pa. 435, 218 A.2d 240 (1966); Thomasik v. Thomasik, 413 Pa. 559, 198 A.2d 511 (1964), and cases cited therein."
Moreover, a petition to open judgment will not be granted unless the petitioner is able to show that he has a good and meritorious defense to the judgment. Carrozza v. Girard Chevrolet Co., 200 Pa. Super. 502, 190 A.2d 577 (1963). The appellants raise three defenses which they claim to be meritorious.
The first two defenses relate to alleged oral agreements made contemporaneously with the note. First, appellants contend that appellee had agreed to manage the business of the corporation for an extended period of time, which agreement he violated, thereby creating a failure of consideration for the note in controversy. Second, appellants contend that the parties understood that the note was not to be used at all so long as there was outstanding debt owed to T.L.C.
However, appellants are barred from proving either of these defenses by the parol evidence rule. As the court stated in Bardwell v. The Willis Company, 375 Pa. 503, 100 A.2d 102 (1953), at page 506: "Where the alleged prior or contemporaneous oral representations or agreements concern a subject which is specifically dealt with in the written contract, and the written contract covers or purports to cover the entire agreement of the parties . . . the law is now clearly and well settled that in the absence of fraud, accident or mistake the alleged oral representations or agreements are merged in or superseded by the subsequent written contract, and parol evidence to vary, modify or supersede the written contract is inadmissible in evidence: Phillips Gas and Oil Co. v. Kline, 368 Pa. 516, 519, 84 A.2d 301; Grubb v. Rockey, 366 Pa. 592, 79 A.2d 255; Walker v. Saricks, 360 Pa. 594, 63 A.2d 9; Gianni v. Russell Co., Inc., 281 Pa. 320, 126 A. 791; Speier v. Michelson, 303 Pa. 66, 154 A. 127; O'Brien v. O'Brien, 362 Pa. 66, 66 A.2d 309; Russell v. Sickles, 306 Pa. 586, 160 A. 610."
Appellants seek to avoid the effects of the parol evidence rule by placing their case within the exception described in Yuhas v. Schmidt, 434 Pa. 447, 258 A.2d 616 (1969), Boyd Estate, 394 Pa. 225, 146 A.2d 816 (1958), and Allinger v. Melvin, 315 Pa. 298, 172 A. 712 (1934), i.e., that where a party seeking to enforce the written instrument admits that the written instrument did not fully and completely state the entire agreement between the parties, parol evidence is admissible to explain and supplement the written instrument.
During his deposition, appellee testified as follows: "Q. Will you tell us in your own words, Mr. Emperee. the reason for your receiving this $10,000.00 note that's involved in this law suit? A. Well, Mrs. Meyers wanted to go into business, and she said she would give me this if I would go in business with her in the Bar Crescent; if we would find a bar she would make me a partner."
It is appellants' contention that this testimony constituted an admission by appellee of the existence of the contemporaneous oral agreement. However, we do not agree that appellee's explanation of the reason why he received a note is an admission of the existence of a contemporaneous oral agreement. To us, it appears to be merely a statement as to the facts surrounding his receipt of the note.
Appellants' other defense is that Mrs. Iris Meyers, as president of the corporate appellant, had no authority to bind the corporation on the note in controversy.
However, the minutes of corporate appellant's only board of directors meeting provided, inter alia, for the following: "Upon motion duly made, seconded, and unanimously passed, it was RESOLVED that the Corporation assume all liability for the purchase of a Restaurant known as . . . together with Restaurant Liquor License No. R8866 . . . and that the Officers are hereby authorized to execute said Loan Agreement and all other security instruments, leases, notes and other documents necessary for the purchase of said business. . . ." (Emphasis added.)
Because Iris Meyers, the president and sole stockholder, did not have the expertise to manage a bar and restaurant, it was necessary for the corporation to employ someone else, like appellee, to do so. To obtain appellee's talents, the note became necessary. The active management of a corporation, not its board, traditionally has had power over employee relationships. Therefore, we believe the president of corporate appellant had, if not express, certainly implied, authority to execute the note on behalf of corporate appellant. Moreover, receipt of the note did induce appellee to quit his business, join the appellants and serve as manager of the bar and restaurant for a period of thirteen months. We have often said that a corporation cannot repudiate the agency by which it secured the benefit it has enjoyed. McClain F. Corp. v. Lineinger, 341 Pa. 364, 19 A.2d 478 (1941), Blumberg v. Broad St. Tr. Co., 329 Pa. 471, 198 A. 27 (1938). As we find no clear abuse of discretion by the court in refusing to open the judgment, we must affirm its order.
Order affirmed.
Mr. Justice JONES and MR. JUSTICE POMEROY concur in the result.
Human nature being what it is, people do not generally promise to pay money to others without receiving a quid pro quo. I therefore cannot bring myself to believe that a simple judgment note with a confession clause can be a complete written contract which covers or purports to cover the entire agreement between the parties to the note. Hence, I believe the parol evidence rule to be irrelevant in the context of this case.
In Gianni v. R. Russel Co., 281 Pa. 320, 126 A. 791 (1924), it was held that when a writing is a "contract complete within itself 'couched in such terms as import a complete legal obligation without any uncertainty as to the object or extent of the engagement . . ., ' " parol evidence would not be admitted to alter the terms of the contract. 281 Pa. at 323, 126 Atl. at 792. I am unable, however, to subscribe to the view that this rule ought to be utilized when the writing involved consists of a simple judgment note containing only the unilateral undertaking of the maker. Such a document can hardly be termed a "contract complete within itself", and should not be covered by the parol evidence rule.
That this has always been the correct rule is clearly illustrated by the many cases which have endorsed this result from times as early as the 19th Century, See, e.g., Davidson v. Young, 167 Pa. 265, 31 A. 557 (1895); Bown v. Morange, 108 Pa. 69 (1884); Lippincott v. Whitman, 83 Pa. 244 (1877); Ayers's Appeal, 28 Pa. 179 (1857); Packer v. Hook, 16 S. R. 327 (1827); Sommer v. Wilt, 4 S. R. 19 (1818).
This view is entirely consonant with the general rule that it is always open to prove consideration if none is mentioned, Tasin v. Bastress, 268 Pa. 85, 110 A. 744 (1920); Cooper v. Potts, 185 Pa. 115, 39 A. 824 (1898); Guttmann v. Rohrer, 86 F. Supp. 506 (E.D. Pa. 1949); and with the accepted proposition that parol evidence is always competent to show want or failure of consideration, Vondersmith v. Sullenberger, 106 Pa. Super. 372, 163 A. 76 (1932). Any other result would in fact be both contrary to common sense and highly disruptive of accepted practice, particularly in proceedings to open judgments. A simple judgment note containing only the maker's unilateral promise to pay is simply not a "written contract [which] covers or purports to cover the entire agreement of the parties . . .," Bardwell v. The Willis Company, 375 Pa. 503, 506, 100 A.2d 102, 104 (1953), and the parol evidence rule accordingly should not apply.
I would vacate the judgment of the Court of Common Pleas of Allegheny County and remand the case to that Court for the taking of additional relevant evidence.
Mr. Justice EAGEN joins in this dissent.