Opinion
No. 6,948.
Submitted October 14, 1932.
Decided October 22, 1932. Rehearing denied December 15, 1932.
Mortgages — Foreclosure — Promissory Notes — Defense That Maturity of Note Extended by Contemporaneous Oral Agreement — Parol Testimony — Inadmissibility — Waiver of Clause Accelerating Payment — When Claim not Maintainable. Promissory Notes — Parol Testimony Inadmissible to Extend Time of Payment. 1. Under sections 7520 and 10517, Revised Codes 1921, parol evidence of an oral agreement, made contemporaneously with a promissory note which contains an absolute promise to pay at a specified time, is not admissible to extend the time of payment or to provide for payment in any other way than that so specified, or to make it depend upon condition. Mortgage Foreclosure — Promissory Note — Inadmissibility of Parol Testimony to Extend Time of Payment as Fixed by Writing. 2. A mortgage on real property to secure a note payable in three years contained a clause accelerating maturity of the debt in case of failure to make prompt payment. The mortgagee proceeded to foreclose under that clause. Defendant set up as a defense that the debt had not matured and testified, over objection and with reservation of opinion by the court as to the admissibility of the testimony, that plaintiff, before execution of the note and mortgage, had orally agreed that if defendants at any time could not meet their obligations, he would "see them through for the three years." Held that, under the above sections, the testimony was inadmissible and that judgment for plaintiff was proper. Same — Waiver of Clause Accelerating Maturity of Debt — When Claim Without Merit. 3. To constitute a waiver it is essential that there be an existing right, benefit or advantage; hence where, in a mortgage foreclosure suit, defendants asserted that an acceleration clause in the instrument had been waived by the mortgagee, but the right of plaintiff to act on the clause was not existent at the time it was said to have been waived, the claim of waiver was without merit. Written Contracts — Rule for Determining Whether Parol Testimony Varies Writing. 4. In determining whether or not the terms of a written instrument are varied by parol testimony, the most satisfactory test is found in the circumstance whether or not the particular element of the alleged extrinsic negotiation is dealt with at all in the writing; if it is mentioned, covered or dealt with in the writing, then presumably the writing was meant to represent all of the transactions on that element.
Appeal from District Court, Lewis and Clark County; W.H. Poorman, Judge.
Mr. C.A. Spaulding, for Appellants.
It is appellants' contention that sections 7520 and 10517, Revised Codes 1921, do not preclude proof of an agreement such as that alleged in their answer. The agreement was not an attempt to alter the terms of a written contract by antecedent oral stipulations, but was only an agreement that a privilege granted by the contract, which respondent could exercise or not, was by him antecedently waived, provided certain conditions subsequent should arise. Appellants have no quarrel with the general rule that parol evidence of antecedent negotiations or stipulations cannot be introduced to vary the terms of a written contract. They do insist, however, that such testimony can be introduced to establish a fact collateral to the written instrument and which controls its effect and operates as a binding agreement. It was so held by this court in the case of Scott v. Prescott, 69 Mont. 540, 223 P. 490. (See, also, McCaull-Dinsmore Co. v. Stevens, 59 Mont. 206, 194 P. 213; Armington v. Stelle, 27 Mont. 13, 94 Am. St. Rep. 811, 69 P. 115; Burke v. Dulaney, 153 U.S. 228, 38 L.Ed. 698, 14 Sup. Ct. Rep. 816; Storey v. Storey, 214 Fed. 973, 131 C.C.A. 269; Colonial Jewelry Co. v. Brown, 38 Okla. 44, 131 P. 1077; Continental Jewelry Co. v. Ingelstrom, 43 Idaho, 337, 252 P. 186; Bohn Mfg. Co. v. Harrison, 13 Mont. 293, 34 P. 313; Bennett v. Tillmon, 18 Mont. 28, 44 P. 80; Savings Bank v. Asbury, 117 Cal. 96, 48 P. 1081; Lewis v. First Nat. Bank, 46 Or. 182, 78 P. 990; Hughes v. Crooker, 148 N.C. 318, 128 Am. St. Rep. 606, 62 S.E. 429; 1 Joyce on Defenses to Commercial Paper, sec. 486; 10 R.C.L. 1038.)
Mr. J.R. Winc, for Respondent.
Citing: Armington v. Stelle, 27 Mont. 13, 94 Am. St. Rep. 811, 69 P. 115; Kelly v. Ellis, 39 Mont. 597, 104 P. 873; Riddell v. Peck-Williamson H. V. Co., 27 Mont. 44, 69 P. 241; State ex rel. Western A. I. Co. v. District Court, 55 Mont. 330, 176 P. 613; Largey v. Leggat, 30 Mont. 148, 75 P. 950; Arnold v. Fraser, 43 Mont. 540, 117 P. 1064; Pritchett v. Jenkins, 52 Mont. 81, 155 P. 974.
This case is before us on an appeal from a decree foreclosing a mortgage given by defendants, appellants herein, to plaintiff, respondent herein.
The complaint sets out a copy of the mortgage which contains a provision that the maturity of the entire indebtedness shall be accelerated by nonpayment of interest, taxes or insurance, and alleges facts showing such acceleration. Defendants set up as a defense, facts upon which they rely as showing that the indebtedness had not matured, notwithstanding the ambiguous terms of the mortgage. Upon the trial plaintiff objected at every stage to the admission of any testimony in support of the affirmative allegations of the answer on the ground that it varied the terms of the written instrument. The testimony was admitted over objection but with a stated reservation of opinion as to its competency and admissibility. The case was tried without a jury and the court made findings which from their character disclose that the trial judge deemed the evidence unavailing to prevent immediate foreclosure.
Defendants specify error on the part of the lower court in finding that the indebtedness was due and payable, and in failing to find that the plaintiff had antecedently waived the acceleration provisions.
The testimony of defendants in substance is that the mortgage [1, 2] foreclosed, and the note secured thereby, were renewals of two other notes and mortgages; that prior to the execution and delivery of the instruments sued upon the defendants, fearing their inability to meet the interest or the taxes on the property at an earlier date than the eventual maturity of the principal, asked the mortgagee to make the note for an added amount to cover those items, and to defer all payments until the maturity of the entire obligation. Defendants testified that plaintiff stated that he could not handle the matter in that way but that he agreed that "if anything happened that I couldn't meet the obligations, he would see us through for the three years." Notwithstanding such a claimed agreement the defendants executed and delivered the note and mortgage, with the acceleration provisions set out in the mortgage.
Defendants also assert that their evidence as to the antecedent agreement was uncontradicted and that the evidence preponderates against the findings of the court. Under the view we take of the case we will not discuss this last-mentioned contention.
The case is definitely controlled by the statutes, sections 7520 and 10517, Revised Codes 1932, which are as follows:
(7520) "The execution of a contract in writing, whether the law requires it to be written or not, supersedes all the oral negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument."
(10517) "When the terms of an agreement have been reduced to writing by the parties, it is to be considered as containing all those terms, and therefore there can be between the parties and their representatives, or successors in interest, no evidence of the terms of the agreement other than the contents of the writing, except in the following cases: 1. Where a mistake or imperfection of the writing is put in issue by the pleadings. 2. Where the validity of the agreement is the fact in dispute. But this section does not exclude other evidence of the circumstances under which the agreement was made, or to which it relates, as defined in section 10521, or to explain an extrinsic ambiguity, or to establish illegality or fraud. The term agreement includes deeds and wills, as well as contracts between parties."
Not only do these sections clearly preclude the adoption of the defendants' contention, but this court has repeatedly spoken to the same effect. (See Hogan v. Kelly, 29 Mont. 485, 75 P. 81; Swan v. LeClair, 77 Mont. 422, 251 P. 155.) In Swan v. LeClair the court quoted from Knox v. Gerhauser, 3 Mont. 267, in which case the court adopted the following very pertinent language: "Parol evidence of an agreement, made contemporaneously with a promissory note which contains an absolute promise to pay at a specified time, is not admissible in order to extend the time for payment, or to provide for the payment out of any particular fund, or in any other way than that specified in the instrument, or to make the payment depend upon condition."
It should be noted here, as it was in Swan v. LeClair, cited above, "neither mistake nor ambiguity in the writing was in issue nor was there any question as to its validity."
Counsel for defendants cites cases which hold that an [3] acceleration clause similar to the one before us can be waived. Here we are not concerned with that rule. To constitute a waiver it is essential that there be an existing right, benefit or advantage. (27 R.C.L., p. 908.) The right which defendants claim was waived was not existent at the time it was discussed between the parties, as testified to by defendants.
Defendants also rely upon the line of authorities which deals with the propriety of proving by parol the nondelivery or conditional delivery of written instruments. These cases, typified by Scott v. Prescott, 69 Mont. 540, 223 P. 490, First National Bank v. Holding, 90 Mont. 529, 4 P.2d 709, and McCaull-Dinsmore Co. v. Stevens, 59 Mont. 206, 194 P. 213, are not in point in this case. Mr. Justice Holloway pointed out in McCaull-Dinsmore Co. v. Stevens: "Defendants did not seek to vary, contradict or even explain the exhibits." The same may be said of the other cases. The cases cited by the defendants are all either distinguishable from the present case or are authority for our conclusions herein.
Here we have a written contract which deals in unequivocal terms with a subject which defendants wish us to hold had been antecedently and orally agreed upon contrary to the language of the written contract.
We believe that Professor Wigmore, in his work on Evidence, [4] sections 2425 et seq., lays down correct tests for determining the question of whether or not the terms of a written contract are varied. Without conceding that it is possible under our system of law and procedure to leave the application of these rules or tests to the trial judge's discretion, we feel that the language and the reasoning found on page 309 of volume 5 are enlightening and persuasive. There he says: "The chief and most satisfactory index is found in the circumstance whether or not the particular element of the alleged extrinsic negotiation is dealt with at all in the writing. If it is mentioned, covered or dealt with in the writing, then presumably the writing was meant to represent all of the transaction on that element." Applying that test we cannot escape the correctness of the lower court's judgment.
The judgment is affirmed.
MR. CHIEF JUSTICE CALLAWAY, JUSTICES ANGSTMAN and MATTHEWS and HONORABLE R.M. HATTERSLEY, District Judge, sitting in place of MR. JUSTICE FORD, disqualified, concur.