Piel Const. Co. v. Commonwealth of Pennsylvania

• Decision Date: 15 November 1929
• Docket Number: No. 3984.,3984.
• Citation: 35 F.2d 265
• Parties: PIEL CONST. Co. et al. v. COMMONWEALTH OF PENNSYLVANIA, to Use of HENDRICKS.
• Court: U.S. Court of Appeals — Third Circuit

35 F.2d 265 (1929)

PIEL CONST. Co. et al. v. COMMONWEALTH OF PENNSYLVANIA, to Use of HENDRICKS.

No. 3984.

Circuit Court of Appeals, Third Circuit.

September 25, 1929.

Rehearing Denied November 15, 1929.

Harry S. Knight, of Sunbury, Pa., Maurice W. Sloan, of Philadelphia, Pa., Knight & Taggart, of Sunbury, Pa., and Sloan, White & Sloan, of Philadelphia, Pa., for appellant.

Charles C. Lark and Robert M. Fortney, both of Shamokin, Pa., and E. E. Pawling and Ulrich & Sommer, all of Selinsgrove, Pa., for appellee.

Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.

WOOLLEY, Circuit Judge.

The Piel Construction Company entered into a contract with the Commonwealth of Pennsylvania for the construction of a concrete highway, giving the Commonwealth its bond with the Maryland Casualty Company as surety to assure, among other things, payment for all material and labor entering into the work pursuant to Pennsylvania Acts in that regard (Act May 31, 1911, P. L. 468; Act May 16, 1921, P. L. 650 Pa. St. Supp. 1928, § 19207). Later, Charles G. Hendricks, trading as George R. Hendricks & Son, by contract with the Piel Company, engaged to supply the cement. Deliveries followed and payments were made by cash and notes in large sums. Then the Piel Company went into bankruptcy owing Hendricks a balance upwards of $30,000, of which $25,800 was represented by notes of the Piel Company which remained unpaid; of this sum $19,058.55 was in notes given and received in accordance with the terms of the contract which called for payment one-half in cash and one-half in notes, and $6,741.45 was in notes which Hendricks had taken when under the contract he should have demanded and the Piel Company should have paid cash. Thereupon the Commonwealth of Pennsylvania brought this suit for the use of Hendricks against the Piel Company and the Casualty Company, contractor and surety on the bond. The plaintiff had a verdict for $34,095.80 and from the judgment entered thereon the Casualty Company appealed.

As the appellant has in its brief compressed its forty assignments of error into four general specifications of error and has confined its discussion to them, we shall pursue the same course.

The first error thus pointed out relates to the terms of payment contained in the Piel-Hendricks contract for cement. These are:

"Terms of Payment: One-half in cash; balance in notes to bear interest at rate of 6 %; 10¢ per barrel discount on cash payments; 5¢ per barrel discount on note payments."

The Casualty Company contended, and still maintains, that this provision of the contract covered the entire agreement of the parties in respect to payment; was complete within itself and imported a legal obligation to be construed by the court and not to be varied by parol evidence; that, properly construed, the terms providing payment by notes meant full and absolute payment whether the notes were paid or protested; and that when Hendricks took the notes in payment of one-half of the contract price, he was paid in full and thereby the surety was discharged from liability under its bond to the Commonwealth to pay him as a sub-contractor for material.

The court refused so to construe this provision of the contract as matter of law because of an unvarying line of Pennsylvania decisions, directly ruling this Pennsylvania contract, to the effect that a note, whether of a third party or an acting party, given, or agreed to be given, by one and accepted by the other is, in the absence of special agreement to the contrary, not absolute but merely conditional payment, defeasible on the dishonor or non-payment of the note, in which event — the debt not being extinguished — the debtor remains liable for his original debt. Mechanics' National Bank v. Kielkopf, 22 Pa. Super. Ct. 128; Shepherd v. Busch, 154 Pa. 149, 152, 26 A. 363, 35 Am. St. Rep. 815; Holmes v. Briggs, 131 Pa. 233, 18 A. 928, 17 Am. St. Rep. 804; Philadelphia v. Stewart, 195 Pa. 309, 314, 45 A. 1056. So fixed has this rule become in Pennsylvania that the giving of a note, or a provision in a contract for payment by notes, has arisen to a presumption in law that settlement in this manner is only conditional payment, League v. Waring & Co., 85 Pa. 244, to be overcome, of course, by evidence of an express agreement between the parties that a note given and accepted shall constitute complete payment. When thus rebutted the question becomes one of fact for the jury, and the burden of showing the intention to make payment by note absolute is upon the party alleging such intention. Mechanics' National Bank v. Kielkopf, 22 Pa. Super. Ct. 128; Philadelphia v. Neil & Lincoln Savings & Trust Co., 211 Pa. 353, 362, 60 A. 1033. We have not found any evidence offered by the Casualty Company, which alleged such intention, to sustain this burden in respect to the provision of the contract here involved. If there was such evidence the jury had it and has passed upon it. But there was evidence, introduced by Hendricks, of a parol contemporaneous agreement to the effect that the notes called for by the "terms of payment" of the contract were to be given by the Piel Company and accepted by Hendricks as conditional payment only and not to be considered as actual payment for materials until the notes were actually paid. The Casualty Company insistently charges error in the admission of this evidence because it says it was admitted to contradict the terms of the written agreement, violative of the rule in that regard.

While the evidence of the parol agreement did contradict the Casualty Company's construction of the terms of the written contract it did not, and, indeed, could not, contradict the terms of the written contract clothed as they were with the presumption of law that the parties intended conditional payment. As the parol agreement was in precise accord with the presumption, the two agreements were in legal effect identical. We regard the admission of this evidence, if technical error because uselessly admitted, clearly not prejudicial, for it did nothing more than support the presumption which the law already accorded the written agreement.

To the same matter the Casualty Company directs the second general specification of error. It maintains that not only was the parol contemporaneous agreement introduced and admitted to contradict the written contract but that it was offered to show it was the thing that induced Hendricks to sign the written contract and that, being admitted for that purpose, the learned trial judge used it for a different purpose, that of justifying its admission on the ground that it was received merely in corroboration and support...