Opinion ID: 2385250
Heading Depth: 1
Heading Rank: 1

Heading: Hoffman Claim

Text: 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 work. 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, equalled 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. [2] 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 [3] is accordingly dismissed without prejudice to him to pursue his claim for work and materials in the bankruptcy proceedings.