Court Opinion

ID: 6662065
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:02:56.380402+00
Date Added: 2024-06-11T16:00:12.520285
License: Public Domain

Rose, J.,
concurring.
The question presented by the record seems to be: Is parol evidence admissible to show that the parties to' the suit had mutually agreed that a written contract which plaintiff is seeking to enforce was never to be performed, but was a mere sham executed for the purpose of influencing the conduct of a third person? The question is a sensitive one, because an error in its solution may result either in a departure from the rule which forbids the use of parol évidence to vary a written instrument or in rewarding a wrong by closing the door to judicial scrutiny. The supreme court of' Vermont has answered the question in the negative. Conner v. Carpenter, 28 Vt. 237; Town of Grand Isle v. Kinney, 70 Vt. 381. The better reasoning, however, and the weight of authority seem to be to the contrary.
In 4 Wigmore, Evidence, sec. 2406, it is said: “Conduct which is to be given legal effects must be jural in its subject * * * i. e. must concern legal relations, not relations of friendship or other nonlegal relations. * * * In all such cases, therefore, the conduct is legally ineffective, or void. In the traditional phraseology of the parol evidence rule, then, it may always be shown that the transaction was understood by the parties not to have legal effect. Ordinarily, the bearing of this principle is plain enough on the circumstances. It has been judicially applied to household services rendered by a member of the family, and to a writing representing merely á family understanding. It is, of course, also applicable to the signature of an attesting witness. When the document is to serve the purpose of a mere sham, this principle in strictness exonerates the makers; but a just policy would seem to concede this only when the pretence is a morally justi*824fiable one (as, to calm a lunatic or to console a dying person), and not when it is morally beyond sanction.”
In Southern Street Railway Advertising Co. v. Metropole Shoe Mfg. Co., 91 Md. 61, a suit upon an advertising contract, defendant pleaded that the “paper-writing was not intended to create, and did not create, any legal relationship whatsoever; that said paper was signed by the defendant upon the request of plaintiff’s agent, in order that the plaintiff or its agents might show the same to other persons dealing with the plaintiff, in order to induce such other persons to pay the rates for advertising mentioned in the contract, and that it was distinctly understood that the paper-writing was not a contract between the parties thereto, and that the bringing of a suit thereon is a fraud upon the defendant.” The court said: “The rule against parol evidence to vary or contradict the terms of an agreement in writing is well settled by the courts. It is earnestly insisted upon the part of the appellee that this rule has no application to this case, because the testimony was offered, not for the purpose of varying or contradicting the contract, but to show that the parties to the writing never intended it to be a contract or as the binding record of a contract. We think the court below was right in admitting the evidence. * * * We come then to the evidence as set forth in the bills of exception, and we think it is clear that it was competent for the purposes offered, that is, not to vary or contradict the terms of the written instrument by parol, but to show that such contract had no force, efficacy or effect, because it was not intended to operate as the record of a binding contract between the parties.”
In Colonial Park Estates v. Massart, 112 Md. 648, the court approved and followed the preceding case, saying: “Although parol evidence is inadmissible to vary or contradict the terms of a written agreement, it is well settled that such evidence is admissible to show that a particular written paper ‘was never intended as a contract or the binding record of a contract between the parties.’ And this has been held to be true even though the paper-writing in question be in the form of a contract and bear the *825signatures of those named in it as the contracting parties. We distinctly held this to he the law upon the authority of many cases, both English and American, cited by us in the Southern Street Railway Advertising Co. v. Metropole Shoe Mfg. Co., 91 Md. 61. The supreme court of the United States in Burke v. Dulaney, 153 U. S. 228, upon a review, of the cases upon this subject, reached the conclusion there stated in its opinion that, ‘The rule that excludes parol evidence in contradiction of a written agreement presupposes the existence in fact of such agreement at the time the suit is brought. But the rule has no application if the writing was not delivered as a present contract,’ and parol evidence was admissible to show that there never was any concluded, binding contract entitling the party who claimed the benefit of it to enforce its stipulations.” See, also, Birely & Sons v. Dodson, 107 Md. 229.
In Humphrey v. Timken Carriage Co., 12 Okla., 413: “The defendant offered evidence to show that the order for the goods, which is made the basis of plaintiff’s action, was given at the solicitation of the plaintiff’s agent, Slusser, who represented that he had sold a car-load of goods to B. F. Berkey, but that Berkey was involved financially and it was feared that a shipment to Berkey would involve the Timken Carriage Company with other creditors; that if he, Humphrey, would sign the order for the goods, he would not be held liable for them; that it would be used only for the specific purpose of enabling the Timken Carriage Company to sell and ship goods to Berkey without danger of having them attached by other creditors; and that the order was signed for this and for no other purpose.” The court sustained the defense, saying: “Admitting that the order so signed was a contract in writing, was it not competent to prove that it was not intended as such, and was in fact executed and delivered for an entirely different and specific purpose? Under the law, as generally accepted and enforced in this country, parol evidence is not competent to change or vary a written agreement; but when does a writing become an agreement? Certainly not until it is assented to in the sense that its *826tenor purports. As between tbe parties, a written instrument which is understood to have a particular import and meaning cannot by one of the parties thereto, without the knowledge or consent of the other, be so diverted from the purpose of its execution as to fix other and new liabilities not contemplated when made. Such a construction of the law wholly destroys the definition which time-honored customs and rules have given to contracts, to wit, that two minds must meet and consent.”
In Grierson v. Mason, 60 N. Y. 394, defendant offered proof that a contract relied upon by plaintiff was not intended to be a contract between the parties, but was executed to enable defendant to procure advances upon goods, and that the contract was delivered to the party making the advances. The court said: “The object of the testimony was to show that the instrument was executed for a specific purpose, and, that purpose being accomplished, was of no effect in changing the contract previously made with the defendant. I think that it was competent evidence for this purpose. The defendant had made out a contract. The plaintiff proved an instrument which altered the contract, and the defendant had a right to prove that the instrument introduced was not intended as an alteration of the contract, but with a view of accomplishing a particular purpose. Such evidence was not given to change the written contract by parol, but to establish that such contract had no force, efficacy or effect; that it was not intended to be a contract, but merely a writing to be used in inducing Woods to make advancements upon the goods. This is in avoidance of the instrument, and. not to change it, and I do not see why the testimony was not as competent in this case as it would be to show that a written instrument was obtained fraudulently, by duress, or in an improper manner. Such evidence does not come within the ordinary rule of introducing parol evidence to contradict written testimony, but tends to explain the circumstances under which such an instrument was executed and delivered, or to show that it was canceled or surrendered.”
*827In Oak Ridge Co. v. Toole, 82 N. J. Eq., 541, the defendant to the hill in equity answered that the contract to purchase the lands was entered into merely for “selling purposes.” The court said: “He rests his defense upon the ground that the agreement, while signed by his client, was to have no binding effect upon him. I think his position is well taken and I agree with his view of the case. In O’Brien v. Paterson Brewing & Malting Co., 69 N. J. Eq. 117, practically all the questions involved in this issue are thoroughly and exhaustively discussed by the learned vice-chancellor. This case, it seems to me, establishes the rule, that if the parties to an agreement stipulated at the time that it was made that it was to have no binding effect upon them, then, notwithstanding their execution of the agreement, such a contract- is of no force and effect at law or in equity. The rule now so' well established in equity, admitting parol evidence to show for what purpose the written agreement was executed, was properly invoked by the defendant. The evidence leaves no doubt in the court’s mind that in this issue the agreement between the complainant and the defendant was made for the purpose as stated by the latter and his witnesses. It is inequitable and unjust, therefore, for the complainant to enforce the agreement of April 13.”
Western Mfg. Co. v. Rogers, 54 Neb. 456, appears to hold that the evidence is inadmissible, but is distinguishable. This case is cited and followed in State Bank of Ceresco v. Belk, 56 Neb. 710, where Burke v. Dulaney, 153 U. S. 228, quoted in the Maryland decisions, is distinguished on the ground that there “never was any complete final delivery of the writing as the promissory note of the makers payable at all events and according to its terms.” The distinction between the Nebraska cases cited and the present case is pointed out in 4 Wigmore, Evidence, sec. 2435, where it is said: “An extrinsic agreement providing a condition qualifying the operation of a written obligation is of course equally ineffective; for an obligation absolute is plainly exclusive of a condition. So far as the present principle is concerned, there is no *828doubt. But by the general principle of delivery (ante, sec. 2410) no conduct becomes effective as a legal act if its consummation is suspended until the happening of a condition precedent; and, hence, such a condition, precedent to the existence of the obligation, may always be established,'and has the effect of destroying the apparent obligation of the writing embodying the draft of the act. The difficulty is to distinguish whether, in a given case, the condition is such a precedent one, or whether it is a subsequent one such as the present principle forbids recognizing. Here some subtlety of construction may be required.”
In a note the author says: “Sometimes, the illustrations of this principle, that a transaction which is a sham is without the scope of legal acts, are hard to distinguish from those cases where the transaction is in substance a legal one, but the understanding is that it shall be merely nominal; here, in effect, one party agrees to hold the other party harmless, and this involves rather the rule about varying a document’s terms.” 4 Wigmore, Evidence, sec. 2406.
The opinion delivered by the chief justice is supported by the weight of authority and is in harmony with the holding in Davis v. Sterns, 85 Neb. 121. I therefore concur.