Creech v. LaPorte Production Credit Ass'n, 3-780A221

• Decision Date: 30 April 1981
• Docket Number: No. 3-780A221,3-780A221
• Citation: 419 N.E.2d 1008
• Parties: James CREECH and Oma Sue Creech, Appellants (Defendants Below), v. LaPORTE PRODUCTION CREDIT ASSOCIATION, Appellee (Plaintiff Below).
• Court: Indiana Appellate Court

Page 1008

419 N.E.2d 1008

James CREECH and Oma Sue Creech, Appellants (Defendants Below), v. LaPORTE PRODUCTION CREDIT ASSOCIATION, Appellee (Plaintiff Below).

No. 3-780A221.

Court of Appeals of Indiana, Third District.

April 30, 1981.

Gerald A. Kamm, Doran, Manion, Boynton, Kamm & Esmont, South Bend, for appellants.

Richard F. Joyce, Kizer, Neu, Joyce, Hite & Wyland, Plymouth, for appellee.

HOFFMAN, Presiding Judge.

James and Oma Sue Creech, the defendants below, brought this appeal from a judgment and decree of foreclosure of a mortgage on real estate situated in Marshall and LaPorte Counties, Indiana. LaPorte Production Credit Association (LPCA) filed the original action against the Creechs on a demand note and to foreclose the mortgage securing the funds advanced pursuant to the note.

The Creechs executed a promissory note dated February 28, 1977 in the amount of $35,000. It was a demand note. The Creechs also executed a mortgage dated July 11, 1977 to secure the promissory note. Upon execution of the note, the total amount loaned to the Creechs was $17,475.75, and an additional sum of $4,470 was loaned thereafter. LPCA filed an action on the note on August 8, 1979. At the time of trial, March 20, 1980, a total sum of $33,001.22 was due on the note. At the trial, the admission of certain testimony by Mr. Creech was objected to by LPCA. The objection was sustained by the trial court and the attorney for Creechs made an offer to prove.

The Creechs raise the following issues, which have been consolidated, on appeal:

(1) whether the trial court erred in not allowing Mr. Creech to testify relative to oral agreements which surrounded the execution of the mortgage;

(2) whether the decision of the trial court was supported by sufficient evidence and was contrary to the evidence; and

(3) whether the decision of the trial court was contrary to law.

During the direct examination of Mr. Creech, he was asked the following question:

"Q. Mr. Creech, this conversation, would you tell, as best you can recall, what you said and what Mr. Schmidt (an officer of LPCA) said."

LPCA objected to this question on the basis that any promise to repay the debt of another is unenforceable unless it is in writing, and thus testimony of any conversation concerning any such promise should not be admitted. The trial court sustained the objection and Creechs made the following offer to prove "If the witness was permitted to answer, he would state that Mr. Schmidt in substance stated that they would loan him the money to pay his payments on the Federal Land Bank over the period of the repayment schedule and that indeed, later on they did make one of the payments, but then that they refused to make them from then on."

LPCA's objection was based upon the theory that the evidence was inadmissible because the subject matter violated the Statute of Frauds. Judge Huff's ruling appears to acknowledge that claim and then proceed to determine alternatively that to have otherwise allowed the testimony would have violated the parol evidence rule. Upon appeal, a trial court's decision will be upheld if it is sustainable on any one legal theory supported by the record. State v. Bailey (1980) Ind.App., 405 N.E.2d 38.

The parol evidence rule excludes any parol or extrinsic proof of prior or contemporaneous oral agreements which would vary or contradict a written agreement. It is based upon the principle that when parties to a contract have put their legal obligation in writing, it is conclusively presumed that the entire agreement of the parties has been reduced to that writing. The rule rests upon a rational foundation of experience and policy and is essential to the certainty and stability of written obligations.

The first paragraph of the promissory note in this case reads upon its face as follows:

"On demand, for value received, I (we) promise to pay to the order of LaPorte Production Credit Association, 1217 State Road No. 2 West, LaPorte, Indiana, negotiable and payable at any office of the payee, the sum of Thirty Five Thousand and no/100 Dollars, or whatever lesser sum may be outstanding, including any future advances which may be made hereunder from time to time within a period of seven (7) years from the date hereof, provided that the total of the unpaid balances of such future advances together with the existing indebtedness hereunder shall not exceed in the aggregate at any one time outstanding the amount stated above, with interest at the rate of 7.5 percent per annum from the date of disbursement until paid, or at payee's option, with interest at such other rates as may subsequently be adopted by payee, from date of adoption until note is paid in full, with attorney's fees and costs of collection as allowed by law, and without any relief whatever from any state laws of valuation or appraisement."

The Creechs contend that various ambiguities surrounded the note and mortgage upon which the suit was brought, and therefore, Mr. Creech's parol evidence should have been allowed. They argued that since the loan application provided for estimated payments and LPCA admitted in its answer to the counterclaim filed in this action that there were to be periodic payments over a seven-year period, the circumstances surrounding the note caused it not to be a demand note and Mr. Creech should have been allowed to testify to these circumstances.

The note in question states that it is a demand note. It states no other specific time for payment. A demand note is a note that is due at once, at the time of its making. IC 1971, 26-1-3-108 (Burns Code Ed.) states: "Instruments payable on demand include those payable at sight or on presentation and those in which no time for payment is stated."

The loan application was never admitted into evidence, but was testified to by an officer of LPCA. This testimony gave no support for the theory that the original note could be repaid over a period of seven years. The promissory note, as set out above, speaks for itself. It is clear that it is a demand note. It is...