#### John A. Cavanagh et al., Appellees, v. Iowa Beer Co., Appellant.

1 Parol evidence: variance of writing: proof of condition precedent. Parol evidence is competent to show a condition precedent to the taking effect of a written lease and has no tendency to vary or contradict the terms of the writing.

2 Condition precedent. A parol agreement to procure permission to operate a mulct saloon upon leased premises, and that the execution and delivery of the lease and its effectiveness shall be subject to the fulfillment of such oral promise, is a condition precedent.

3 Waiver of condition precedent: 'proof. Waiver of a condition precedent cannot be proved unless pleaded.

Illegal agreements: public policy. The agreement of a lessor to 4 procure permission to operate a mulct saloon on the leased premises is not against public policy.

*Appeal from Polk District*Court.— HoN. W. H. McHenry, Judge.

Monday, November 18, 1907.

*237ActioN at law to recover damages for breach of a contract of lease. Defendant admitted tbe making of the lease, but pleaded that it never became operative by reason of breach of a condition precedent. A jury was waived, but before any testimony was introduced plaintiff moved for judgment upon the pleadings. This motion was sustained, and defendant *appeals.*

Reversed.

*N. T. Guernsey*and *Hubbard & Burgess,*for appellant.

*St. John & Stevenson,*for appellees.

Deemee, J.

1. Parol evidence: variance of writing: proof of condition precedent. In January of the year 1905 the parties to this action entered into a written contract of lease for part of a certain lot in the city of Des Moines. This lease was for a term of five years from and after the 1st day of April, 1905, and provided for an annual rental of $1,000 to be paid in ad- . vanee monthly installments, beginning April 1, 1905. Plaintiff alleged “ that after the malting of said lease, and before the 1st of April, 1905, they erected the brick building specified in the said lease on said premises, and expended therefor $1,200 or moré, and fully complied with the terms and condition of said lease on' their part, and about the 1st day of April, 1905, plaintiffs delivered to the said defendant the full possession and control of said premises, and the defendant was in possession of said premises thereafter from the 1st day of April, 1905, to about the 1st day of June, 1905, at about which latter day the said defendant abandoned said premises, and refused to perform any of the conditions of said lease on its part, and hitherto have wholly failed to pay any rents, and have refused to have anything to do with said premises, and about the 5th day of June, 1905, said plaintiffs took possession and control of said premises with notice to said defendant and under a stipulation that the act of so taking possession should not in *238any manner prejudice the rights or liabilities of either of .the parties under said lease.”

The lease contained these, among other, provisions: The defendant agreed “ not to permit any unlawful business to be conducted on said premises and to pay promptly during the continuance of this lease all amounts whatsoever that may be legally required of it in connection with the running or operation of a saloon on said premises, as well as the operation and running of any other business of whatsoever kind which may be conducted and carried on upon said premises.” And the plaintiff agreed to erect a one-story brick building sixteen by fifty feet upon the lot to be completed on or. before April 1, 1905, suitable and ready for the conducting of a saloon, and, upon request, remove another brick building and substitute a frame one in its place. Defendant admitted the execution of the lease, but averred that the- sole inducement and consideration therefor.was an oral agreement on plaintiff’s part that they (plaintiffs) would procure or cause to be procured from the city council of the city of Des Moines the consent of the said city council to the operation by defendant of a saloon upon the leased premises and that the lease was not to become obligatory until plaintiffs procured this consent. It also pleaded that plaintiff failed and neglected to procure this consent, and that, by reason thereof, the consideration for said lease failed, and that it never became operative. We now extract from the answer these further paragraphs:

> This defendant avers that when it became evident that such consent could not be procured from said city council, and that said plaintiffs could not comply with their oral agreement as hereinbefore set out, this defendant orally notified said plaintiffs that it would not enter into the possession of said leased premises, and that it disclaimed • any and all liability under said lease, and would refuse to be bound thereby, because of the failure of said plaintiffs to perform the condition and tender the consideration to'which its execution and delivery was made subject, and that, in *239pursuance of sucb notice, said defendant never entered into tbe possession of .or assumed the control over said leased premises. . . . This defendant avers that the failure of said plaintiffs to perform their oral agreement and to fulfill the condition precedent to the complete delivery of said lease, and to the consummation of the contract therein contained, was not due in any respect to the default, omission, or neglect of this defendant. . . . This 'defendant avers that hy reason of the failure of said plaintiffs to carry out and perform' the collateral oral agreement so made by them, which agreement furnished the sole inducement to and consideration for the signing of said lease by this defendant, and which was a condition precedent to the complete delivery of said lease, and the complete consummation and execution of the contract therein contained, said lease never became a valid instrument or binding upon either of the parties thereto. . . . This defendant avers that it was mutually understood and agreed by and between the parties to said lease, at and prior to its signing, that the same should not become binding upon the parties thereto, nor upon this defendant, nor he enforced by either of said parties by suit at law or in equity, unless and until the condition precedent set out should have been fully and duly performed by said plaintiffs.

Plaintiff’s motion for judgment was bottomed upon the thought that the answer pleaded no defense, in that it was predicated upon a parol agreement at variance with and in contradiction of the written contract of lease. The trial court held that this alleged parol agreement could not be proved and did not constitute a defense to plaintiff’s action; for that oral testimony in support thereof would tend to vary and contradict the terms of the written contract. Upon no other subject, perhaps, has so much been written as upon the rule of evidence of substantive law that a written agreement cannot be varied or contradicted hy proof of a parol collateral agreement. The rule is one of the first the student learns, and is so elementary as to need nothing more than a mere statement. To this rule there are many exceptions, some of which are quite as important as the rule and doubt*240less as well settled. Tbe difficulty is in applying tbe rule with its exceptions to tbe facts of tbe particular case. One of tbe best statements of some of tbe exceptions is to be found in *Thomas v.*Scutt, 127 N. Y. 133 (27 N. E. 961), from wbicb we quote tbe following:

> Tbe real exceptions may be grouped in two classes, tbe first of wbicb includes those cases in wbicb parol evidence bas been received to show that that wbicb purports to be a written contract is in fact no contract at all. Tbus fraud, illegality, want of consideration, delivery upon an unperformed condition, and tbe like may be shown by parol, not to contradict or vary, but to destroy, a written instrument. Such proof does not recognize tbe contract as ever existing as a valid agreement, and is received, from tbe necessity of tbe case, to show that that wbicb appears to be is not, and never was a contract. . . . Tbe second class embraces those cases wbicb recognize tbe written instrument as existing and valid, but regard it as incomplete, either obviously, or at least possibly, and admit parol evidence, not to contradict or vary, but to complete, the entire agreement, of wbicb tbe writing is only a part.

These have also been recapitulated in Kennedy’s Trial Evidence, 45, in tbe following language: “The rule does not exclude evidence (b) showing tbe existence of a condition precedent (e), of collateral agreements not intended to be embodied in or superseded by tbe written instrument and not inconsistent with it (i), wbicb merely interprets or explains tbe writing.” Another exception sometimes recognized is one permitting proof of tbe consideration of tbe instrument, unless tbe recital or agreement with reference thereto is contractual; i. e., something more than an unilateral admission. *Kelly v.*C., *M. & St. P. R.*R., 93 Iowa, 436.

As tbe writing in this case appears to be full and complete in itself, and as tbe consideration is contractual and not a mere recitation of tbe receipt of money or other unilateral statement, tbe case manifestly does not come within any of tbe '.exceptions named, save the one wbicb bas been *241shortly stated, to tbe effect that there was a condition precedent to tbe taking effect of tbe lease. A condition precedent in a contract is an act to be performed by one party before tbe accruing of a liability of tbe other party,’1 and proof of such a condition does not vary or contradict tbe contract, but shows that no contract between tbe parties ever became effective. If the condition be a subsequent one — i. e., such an one as concedes tbe validity of tbe contract, save as it has been abrogated or destroyed by breach of condition — then parol evidence is not admissible, for it .manifestly varies or contradicts tbe terms of tbe written contract. As said in *Bucksport v.*Inhabitants, 67 Me. 295: “Conditions have no idiom. Whether they are precedent or subsequent is a question purely of intent, and tbe intention must be determined by considering, not only tbe words of tbe particular clause, but also tbe language of tbe whole contract, as well as tbe nature of tbe act required and tbe subject-matter to which it relates.” As tbe case was determined in tbe district court upon tbe allegations of tbe answer, we must look to these to ascertain whether tbe oral agreement pleaded was a condition or a covenant, and if a condition, whether precedent or subsequent. And this leads first to tbe distinction between a covenant and a condition.

a. Condition precedent. Tbe difference between tbe two relates largely to tbe remiedy. If breach of tbe agreement pertains to tbe validity of the instrument or is a ground for forfeiture, it is a condi-tion5 imt, if the remedy for a breach is merely an ae(q0]DL aj; iaw for damages, then tbe agreement is simply a covenant. Going now, to tbe agreement pleaded, it will be observed that it is clearly a condition. Tbe pleader charged that plaintiffs agreed to procure a permit for defendant to keep and sell intoxicating liquor upon the premises, and that tbe execution and delivery of tbe lease was subject to tbe condition that tbe oral agreement, should be fully complied with before tbe lease should become obligatory upon, the- defendant, and that tbe delivery of tbe lease *242should not become complete or absolute until sucb permit or consent was obtained; that plaintiffs failed to procure this consent, and that the lease never became a valid or binding instrument. This -is stated in many different ways in defendant’s answer, and to our minds on its face clearly shows the non-performance of a condition precedent to the taking effect of the lease. What the proofs may show as to the intent and purposes of the parties we do not know, as the case was decided upon the allegations of the pleadings and these clearly bring it within the exception to the general rule which we have been considering. As sustaining these conclusions, see *Sutton v.*Weber, 127 Iowa, 361; *Oakland Ass'n v. Lakins,*126 Iowa, 121; *Sutton v.*Gribel, 118 Iowa, 78; *Marsh v. Chown,*104 Iowa, 556; *Reynolds v. Robinson,*110 N. Y. 654 (18 N. E. 127).

3. Waiver oj? condition precedent: .proof. It is manifest, we think, that the parol evidence rule does not apply to the facts as pleaded. Appellees say, however, that, as defendant went into possession of the property and accepted the lease, it cannot be-heard to. plead breach of a condition precedent. To this there are two answers: If this claim amounts to anything, it resolves itself down to one of waiver, of the performance of the condition, and this was not pleaded. Moreover, defendant denied that it went into possession under the lease, and upon this denial the case was submitted. There being no affirmative proof of the waiver, it cannot, of course, be considered.

4. Illegal agreements: public policy. Again, it is contended that the alleged agreement was against public policy and void. This appears to be an afterthought, and was not one of the grounds of the motion. But, whether this be true or not, there is nothing in the agreement pleaded which is in any way violative of positive statute or of public policy. Plaintiffs were to do nothing illegal, but their engagement was to do a legal act; that is, to secure proper consent to the sale of intoxicants.

*243We reach tbe conclusion that the trial court was in error in rendering judgment on tbe pleadings; and its order must he, and it is, *reversed.*