Appeals, Nos. 72, 91, 96, 101, 132, 133, 136, Jan. T., 1958, from decree of Orphans' Court of Delaware County, 1955, No. 207, in the estate of William G. Boyd, deceased. Decree modified and as modified affirmed and case remanded to the court below with directions; reargument refused January 5, 1959.
Joseph Neff Ewing, with him Allen S. Olmsted, 2nd, for Hoffman, appellant (No. 91).
Laurence H. Eldredge, with him Roland J. Christy and William A. Burns, for Alex Guerrina & Sons, Inc., appellant (No. 72).
Joseph T. Labrun, Jr., with him Edward H. P. Fronefield, and Lutz, Fronefield, Warner & Bryant, for Parker, appellant (No. 101).
David E. Thomas, with him Raspin, Espenshade, Heins, Erskine & Stewart, John R. Graham, R. Winfield Baile and George W. Thompson, for attaching creditors, appellants (Nos. 96, 132, 133 and 136).
John B. H. Donaldson, with him E. E. Lippincott, II, and Lippincott & Donaldson, for appellee.
Before Jones, C.j., Bell, Chidsey, Musmanno, Jones and Cohen, JJ.
OPINION BY MR. JUSTICE BENJAMIN R. JONES.
This is an appeal from a final adjudication of the Orphans' Court of Delaware County dismissing certain claims against the Estate of William G. Boyd and providing for the distribution of the estate. The claims arose out of a construction contract executed by Boyd (herein called decedent) and one William B. Albright. Due to the number of litigants involved and the variety of legal questions presented, the facts pertinent to each claim and each claimant's contentions will be discussed separately, after a brief recital of the factual background common to all the claims.
On December 10, 1947, the decedent and Albright, as a general contractor, entered into a written agreement whereby Albright was to perform certain construction work on a property owned by decedent for a consideration of $42,180. On January 9, 1948, a supplemental agreement was made providing for additional
work in the amount of $15,820.*fn1 Both sums were payable by decedent two months after the issuance of the Architect's Certificate of Final Completion of the work, one Francis Jobson being employed by decedent as the architect. On April 10, 1948, after Albright had acknowledged in writing a default on his part under the above mentioned agreements, another contract was executed by the parties. Albright apparently admitted his default in order to induce decedent to apply for a construction mortgage in the amount of $45,000, the costs of obtaining which Albright agreed to assume, together with the payment of interest on the mortgage. It was also contemplated at this time that a permanent mortgage would subsequently be obtained in a larger amount. The consolidated agreement required that Albright perform the same construction work called for in the previous agreements for the same consideration of $58,000, but provided for payments on account of work completed and approved with a twenty per cent retention until two months after final completion of the work. Decedent then applied for a construction mortgage in the amount of $40,000.
On May 6, 1948, decedent executed and delivered to Albright a judgment note in the amount of $30,000 for the alleged purpose of raising sufficient funds to satisfy the sub-contractors. On June 4, 1948, settlement was held on the construction mortgage and the $40,000 was made available to decedent. Previous to the date of settlement, Albright had received $18,300 from decedent and he received an additional $26,576.79 from the mortgage fund, or total payments of $44,876.79.
However, judgment was entered on the note on April 1, 1949, and assigned to claimant Hoffman three days later. Upon this judgment the claim of Hoffman is based.
In the spring of 1948, the sub-contractors ceased work and refused to continue until some guarantee of payment was made to them. Negotiations between decedent, Albright, Jobson and some of the sub-contractors took place during the months of June, July and August of 1948. Appellant Guerrina contends that the result of these negotiations was the personal assumption by decedent of the amount due Guerrina under its contract with Albright and was to be paid from the funds of the permanent mortgage when it was secured. Appellant Parker maintains that a partial assignment was made to him by Albright of the amount that would be due Albright under his contract with decedent, that this represented a valid claim against decedent and should have been paid as soon as the permanent mortgage was secured.
In April of 1949, Guerrina brought suit against decedent. On September 9, 1949, decedent filed a petition to open the judgment which had been assigned to Hoffman. On January 12, 1950, a permanent mortgage in the amount of $75,000 was obtained. After the construction mortgage had been satisfied a sum of approximately $35,000 remained which was ultimately used to reduce the permanent mortgage. Commencing in February of 1950, a number of attachment executions were issued against decedent and decedent was given notice of claims of other general creditors of Albright. These comprise the balance of the claims against the estate.
On November 27, 1951, Albright was adjudged a bankrupt and on March 29, 1954, decedent died. All of the claims involved in these appeals were filed
against his estate. The trustee in bankruptcy and the Executor have agreed that the sum of $25,000 is due and owing as the balance under the construction contract between decedent and Albright. The court below awarded this sum to the trustee and dismissed all the other claims against the estate without prejudice to them to proceed in the bankruptcy proceedings. These appeals followed.
Hoffman's claim is based upon the judgment against decedent assigned to him by Albright as security for work and materials which had been or were to be furnished by Hoffman for completion of the owrk. At the time of the assignment, Hoffman failed to obtain from Boyd a declaration of no setoff or counterclaim. The estate's defense is an alleged oral agreement entered into at the time of execution of the note upon which judgment was entered. Judge C. William Kraft, Jr., who at that time was decedent's attorney, testified that at a meeting held subsequent to the execution and delivery of the note Albright admitted that the note was to be used only for the purpose of raising sufficient funds to continue operations and was to be considered paid when the amount received by Albright from decedent, particularly from the construction mortgage, equaled the face amount of the note. Judge Kraft's testimony was substantiated by Joseph Guerrina, a sub-contractor, who testified that Albright admitted to him that the note was given only to insure the granting of the construction mortgage and it was to be paid from the first monies Albright received from decedent. On the other hand, Jobson, the architect, testified that it was his understanding that the note was to be paid at the completion of the job and that he made no record of any payments
against the note in keeping the accounts between decedent and Albright. If the evidence introduced on behalf of the estate be admissible, it is obvious that the note had been paid at the time judgment was entered and this would constitute a valid defense both as against Albright and his assignee, Hoffman.
However, appellant Hoffman maintains that the introduction of oral testimony as to the conditions upon which the note was issued and the specification of the mode of payment constitute a violation of the parol evidence rule in that it alters and varies the terms of a written instrument intended by the parties to embody the complete agreement between them. In support of this argument, Hoffman relies primarily upon Speier v. Michelson, 303 Pa. 66, 154 A. 127, wherein we stated that an allegation of an oral agreement to restrict the payment of a negotiable instrument to a specific fund would not constitute a sufficient defense to an action on the note because to permit evidence of such oral agreement would contradict the terms of the note bearing on its face an unqualified promise to pay a specific amount of money. In any event, Hoffman argues that even if the evidence relied upon by the estate was admissible, such evidence is insufficient to establish the purported parol agreement.
Prior to Gianni v. Russell & Co., Inc., 281 Pa. 320, 126 A. 791, the parol evidence rule as applied by this Court and designated as the so-called Pennsylvania Rule was that the breach of a contemporaneous parol agreement which induced the execution of the written agreement constituted sufficient fraud to permit the introduction of the parol agreement. See IX Wigmore § 2431(c) (3d Ed.) and cases therein cited. However, in the Gianni case, this Court rejected the above rule and returned to the more conventional application, namely, that if the written agreement was intended
by the parties to encompass the matter in dispute, then evidence of a contrary nature based upon an oral agreement at the time of the execution of the written agreement was barred in the absence of fraud, accident or mistake: Anderson v. Murdock Storage & Transfer Company, Inc., 371 Pa. 212, 88 A.2d 720; T. W. Phillips Gas and Oil Company v. Kline, 368 Pa. 516, 84 A.2d 301; Grubb v. Rockey, 366 Pa. 592, 79 A.2d 255. As applied to negotiable instruments, this rule prevented the introduction of a contemporaneous agreement to show that payment was to be made from the proceeds of a particular fund, or that payment would not be demanded until the happening of a specified event. Rosenblum & Co. v. Rosenblum, 313 Pa. 49, 169 A. 79; Architectural Tile Co. v. McSorley, 311 Pa. 299, 166 A. 913; Speier v. Michelson, supra; Hein v. Fetzer, 301 Pa. 403, 152 A. 388; Yorkshire Worsted Mills v. Braman, 115 Pa. Superior Ct. 333, 175 A. 726.
However, the parol evidence rule has never barred the introduction of clear, precise and convincing evidence to show that the party who seeks to enforce the written agreement according to its tenor has admitted and acknowledged that the agreement as written did not express what the parties intended and that what the parties intended was omitted from the written agreement by mistake or accident: Allinger v. Melvin, 315 Pa. 298, 172 A. 712; Newland v. Lehigh Valley R.R. Co., 315 Pa. 193, 173 A. 822; Bryant v. Bryant et al., 295 Pa. 146, 153, 144 A. 904; Ward v. Zeigler, 285 Pa. 557, 132 A. 798; Howell et ux. v. Wheelock, 115 Pa. Superior Ct. 599, 176 A. 252; Frederick Estate, 156 Pa. Superior Ct. 547, 553, 41 A.2d 59. In the Allinger case this rule was applied to a factual situation somewhat similar to the present situation. There defendant had executed an unconditional bond and mortgage. A judgment entered on the bond was
subsequently assigned to the plaintiff who failed to obtain a declaration of no set-off or counterclaim. On a petition to open the judgment it was alleged that the parties had a contemporaneous parol agreement limiting the bond to the mortgaged property. The court below permitted the assignor to testify that he and the defendant had this contemporaneous parol agreement. The court stated, at page 304: "The principle governing the decision in Gianni v. Russell, 281 Pa. 320, 126 A. 791 (in which case the evidence in support of the oral agreement was not, as here, uncontradicted), and cases following it, on which appellant relies, has no application to a record like this. Those cases hold that 'if the matter proposed to be shown by parol is the subject of a covenant in the agreement, which is complete, such evidence to alter its terms cannot be received' (Cridge's Est., 289 Pa. 331, 338, 137 A. 455), unless it is admitted that the whole of the agreement is not set forth in the writing: Ward v. Zeigler, 285 Pa. 557, 132 A. 798". (Emphasis supplied). The rule enunciated in the Allinger case governs the present situation. Both Judge Kraft and the subcontractor, Guerrina, testified that Albright admitted that the note was to be considered paid from the first moneys Albright was to, and did, in fact, receive from the decedent.*fn2 In proceedings to open the judgment entered upon the note - at a time when both parties were living - Albright not only failed to take the stand
to deny the agreement between the parties but in his sworn answer substantially admitted such an understanding. Although the record in the present case is not as strong as that in the Allinger case in that therein the assignor himself testified and admitted the terms of the contemporaneous agreement while instantly the admission was proven by testimony found to be clear, precise and convincing by the court below, we believe that the evidence is such as to bring it within the Allinger rule and that such testimony is not excluded by the parol evidence rule. That rule is aimed at the prevention of, not the protection, of fraud.
The claim of Hoffman*fn3 is accordingly dismissed without prejudice to him to pursue his claim for work and materials ...