Court Opinion

ID: 8776226
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:03:00.652356+00
Date Added: 2024-06-11T17:02:34.555792
License: Public Domain

NOYES, Circuit Judge
(after stating the facts as above). The statement of the referee in his report that conversations between the bankrupts and Bernays before the agreement was signed “must be -held to have been merged in the agreement,” and that they had been improperly admitted in evidence, was manifestly erroneous. Of course, as a rule of interpretation, parol evidence is not received to contradict or vary the terms of a written instrument; but, when the question is whether the instrument has any validity at all, such evidence is always received. The courts never permit form to shield illegality. *339Statutes cannot be evaded by shams and pretenses. Testimony concerning the conversations of the parties to a written agreement prior to its execution might be the best and most persuasive evidence to show that, instead of being what it purports to be, it is merely a cover for a usurious transaction.
It is true that, notwithstanding his erroneous view of the law, the referee stated in his report some of the testimony concerning conversations between the bankrupts and Bernays, and that he reached the conclusion that the agreement was not usurious. But it is impossible to say that the error of the referee was not prejudicial to the appellant. It was the duty of the referee to give careful consideration to the testimony concerning the antecedent conversations—that testimony was probably the most important in the case as showing the real transaction between the parties—and how can it be said that he gave it such consideration when he was of the opinion that it had been erroneously received and could not alter the written agreement?
The error of the referee calls for a reversal of the order, unless we are satisfied, from our own examination of the evidence as shown upon the record, that the ultimate conclusion reached by the referee was right. But, as already pointed out, the question in this case is whether the agreement was what it purports to be—in part a contract of employment—or was in fact intended as a cover for obtaining unlawful interest upon money loaned. The character of the transaction depends upon the intention of the parties, and the question of intent is one which, in ordinary actions, must be determined by the jury, and which, in a proceeding in bankruptcy, should be determined by a court or official having opportunity to see the witnesses and determine the weight to be given to their testimony. There is testimony in this case which, if credited, would warrant a jury—or other trier of the facts—in finding that the alleged contract of employment was an afterthought, intended to cover an agreement to pay a share of the profits of thé business in addition to the legal rate solely for the loan of the money. On the other hand, we cannot say that the evidence is such as would have required a jury to reach such conclusion. Much would depend upon the credibility of the witnesses.
In some cases this court is required to weigh testimony upon the mere printed record; but it is obvious that we cannot do so to advantage, and that we should not do so unless necessary or unless the cases are entirely clear. In the present case the questions of fact seem doubtful, and we do not feel called upon to determine them. We think it much more desirable for all concerned that the District Court should, by itself or through a reference to a special master or to another referee, ascertain the intention of the parties to this agreement in the light of all proper evidence and determine its legality.
The order of the District Court is reversed, with costs, and the matter remanded for further proceedings in accordance with this opinion.