Paradise Beach Homes, Inc. v. South Atlantic Lumber Co.

• Decision Date: 17 March 1960
• Docket Number: No. A-361,A-361
• Citation: 118 So.2d 825
• Parties: PARADISE BEACH HOMES, INC, a Florida corporation, Appellant, v. SOUTH ATLANTIC LUMBER CO., Inc., a Florida corporation, Appellee.
• Court: Florida District Court of Appeals

Page 825

118 So.2d 825

PARADISE BEACH HOMES, INC, a Florida corporation, Appellant, v. SOUTH ATLANTIC LUMBER CO., Inc., a Florida corporation, Appellee.

No. A-361.

District Court of Appeal of Florida, First District.

March 17, 1960.

E. W. Gautier, New Smyrna Beach, for appellant.

Olsen & Byrd, Orlando, for appellee.

CARROLL, DONALD, Judge.

The defendant in this mortgage foreclosure suit has appealed from an adverse final decree entered by the Circuit Court for Volusia County.

The only question for us to decide on this appeal is whether the court committed reversible error in excluding certain evidence offered by the defendant at the hearing on the issues in this suit.

The appellee, plaintiff below, alleged in its complaint and proved at the hearing before the chancellor that on February 16, 1957, the appellee-defendant executed and delivered to the plaintiff as payee its promissory note for $4,714.96, and to secure the same executed and delivered to the plaintiff, as mortgagee, its mortgage covering certain real property owned by the defendant in Volusia County; that the defendant had paid $1,200 but refused to make any further payments on the said note and mortgage, leaving a principal balance of $3,514.96 due and owing from the defendant to the plaintiff, plus interest.

In its answer to the complaint the defendant alleged as its first defense that at the time of the execution of the note and mortgage, it was indebted to the plaintiff in the amount of $1,588.77, not $4,714.96, and that the mortgage was executed and delivered by mistake and upon the agreement of the parties thereto that the accounts between the parties would be adjusted as soon as the defendant's books were available and the indebtedness verified; that the principal sum the defendant owed the plaintiff when the suit was filed was $388.71.

In the seventh defense of its answer the defendant alleged that prior to February 16, 1957, the defendant had purchased various quantities of lumber from the plaintiff, and on that date the plaintiff represented to the defendant that it was in need of funds and could not borrow them without security, and requested the defendant to give the plaintiff a note secured by a mortgage on real estate owned by the defendant; that neither the defendant nor the plaintiff had an accurate statement of their accounts and it was agreed that, if the mortgage was in excess of the amount owned by the defendant to the plaintiff, the defendant would be given credit on its note and mortgage; that, after the defendant executed and delivered the note and mortgage, it was determined that the defendant was indebted to the plaintiff in the sum of $1,588.71, and the defendant requested that the account between the parties be adjusted accordingly and the unpaid balance would be immediately paid in full; that the plaintiff failed and refused to adjust the said accounts and refused to accept the sum which was properly due it and thereupon instituted this foreclosure suit.

At the hearing before the chancellor the president of the defendant corporation admitted on the witness stand that on February 16, 1957, he, acting for the defendant, executed and delivered to the plaintiff the note for $4,714.96 and the mortgage securing the note.

Subsequent to this testimony, the defendant's president and its accountant-bookkeeper testified at length in substantiation of the first and seventh defenses of the answer, particularly to the effect that the agreement of the parties was that the amount of the note and mortgage would be adjusted to reflect the true amount of the indebtedness owed the plaintiff by the defendant, and that such true amount on February 16, 1957, was $1,588.77. The latter witness identified numerous vouchers and checks, offered in evidence by the defendant, which documents showed the amount of the indebtedness to be as he and the president had testified. The plaintiff objected to, or moved to strike, this testimony and evidence, chiefly on the ground that they were in violation of the parol evidence rule. At this hearing the chancellor reserved his ruling on these objections and motions to strike 'until the final hearing.' In an order clarifying his final decree the chancellor held that the testimony and evidence discussed in this paragraph was 'excluded and not admitted in evidence in this cause.' We think this was error, for the reasons stated below.

In considering the question whether the parol evidence rule barred the admissibility of the evidence excluded by the chancellor, it is helpful to review the purpose, true meaning, and scope of that rule.

Simply stated, the parol evidence rule is a rule declaring that parol evidence is inadmissible to vary the terms of a valid written instrument. J. M. Montgomery Roofing Co. v. Fred Howland, Inc., Fla.1957, 98 So.2d 484. It is not a rule of evidence but a rule of substantive law. Knabb v. Reconstruction Finance Corp., 1940, 144 Fla. 110, 197 So. 707. The rule rests upon a rational foundation of experience and policy and is essential to the certainty and stability of written obligations. Schwartz v. Zaconick, Fla.1953, 68 So.2d 173.

The simple statement of the parol evidence rule as set forth in the preceding paragraph may be misleading, however, unless one comprehends the numerous clarifications of and exceptions to this rule that have been recognized by the courts.

Among the clarifications recognized by the courts in Florida are these: when the statement of a term, such as the consideration, in a written agreement is not a complete statement, parol evidence may be admissible as to that term, Jackson v. Parker, 1943, 153 Fla. 622, 15 So.2d 451; the parties to a written contract may prove by parol evidence facts consistent with the agreement, although not expressed in it, McNair & Wade Land Co. v. Adams, 1907, 54 Fla. 550, 45 So. 492; where a particular element of an alleged extrinsic negotiation is not dealt with in the writing, it is presumed that the writing does not represent the entire transaction, and parol evidence in proof thereof is admissible, Jackson v. Parker, 1943, 153 Fla. 622, 15 So.2d 451; parol evidence may be introduced to explain ambiguities or uncertainties in a written contract, McClure v. Century Estates, 1928, 96 Fla. 568, 120 So. 4.

One of the most important exceptions to the parol evidence rule, an exception which we think is applicable to the facts in the present appeal, is that parol evidence is admissible to prove a condition precedent to the written contract for the purpose of showing that there existed no binding contract.

The Florida Supreme Court in Hensley Insurance Co. v. Echols, 1947, 159 Fla. 324, 31 So.2d 625, 626, declared that the following general rule as stated in 20 American Jurisprudence, Evidence, Section 1095, page 956, 'is supported by the great weight of authority':

"* * * A conditional delivery or execution of a writing may be shown by parol. * * * Parol evidence is admissible to show that a written contract, although manually delivered to the obligee therein named, was not to become a binding obligation except upon the happening of a certain event, such as an inspection and approval by the buyer of goods which are the subject matter of the sale. * * *"

A clear application of this rule may be found in Bassato v. Denicola, Fla.1955, 80 So.2d 353-354. There the plaintiff had filed a suit on two promissory notes, each in the amount of $2,500, executed by the defendant and made payable to the plaintiff. In his amended answer the defendant alleged that the $5,000 represented by these notes was, in reality, an investment by the plaintiff in a partnership business to operate a liquor establishment; that the defendant, who owned a liquor license, advanced to the partnership all of the stock, some of the fixtures, the liquor license, and the good will of a liquor establishment theretofore operated by the defendant, and the $5,000 was contributed by the plaintiff; that the plaintiff was not a registered voter in Connecticut, the place where the note was executed and the partnership business was located, so that he could not legally be shown as a partner in such business; that the notes in the total amount of $5,000 were executed by the defendants at the plaintiff's request in order to evidence the plaintiff's interest in the partnership until such time as he could be shown as a partner in the business; and that 'the notes became null and void and of no effect as now plaintiff was a partner and his interest was represented by his having a onehalf share in said business.'

In this Bassato case, however, the Circuit Court entered a summary judgment against the defendant, adjudging that the defense sought to be interposed in his answer contituted an attempt to vary the terms of the promissory notes by a parol agreement.

In reversing this summary judgment and remanding the cause for further proceedings, the Supreme Court said:

'We think that the above allegations were sufficient to make out a case under Section 674.18, Fla.Stat.1953, F.S.A., that, as between the immediate parties, 'the delivery (of a promissory note) may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. * * *' and within the rule stated in Tharp v. Kitchell, 151 Fla. 226, 9 So.2d 457, 460, as follows:

"Parol evidence is admissible, as between the parties, to show that a negotiable note was not to become binding, except upon the happening of a certain event in the future. Such evidence does not vary the terms of a written instrument but tends to establish the fact that the note as between the parties never became a fixed and binding obligation because the event in the future contemplated by the parties failed to happen or occur.'

'We find nothing in the deposition of the defendant inconsistent with the allegations of his amended answer, and we think he should have been...