Regional Agr. Credit Corp. of Washington, D.C. v. Hendley

• Decision Date: 07 October 1948
• Docket Number: 4 Div. 454.
• Citation: 251 Ala. 261,37 So.2d 97
• Parties: REGIONAL AGRICULTURAL CREDIT CORPORATION OF WASHINGTON, D. C., v. HENDLEY.
• Court: Alabama Supreme Court

37 So.2d 97

251 Ala. 261

REGIONAL AGRICULTURAL CREDIT CORPORATION OF WASHINGTON, D. C., v. HENDLEY.

4 Div. 454.

Supreme Court of Alabama

October 7, 1948

Appeal from Circuit Court, Bullock County; J. S. Williams Judge.

Cope & Cope, of Union Springs, for appellant.

Lawrence K. Andrews, of Union Springs, for appellee.

Defendant interposed the following pleas:

'3. The defendant for answer to said complaint and each and every count thereof, saith: That the defendant is not indebted to the plaintiff on the note upon which this suit is brought for the reason that said note has been paid in full according to the contract which caused the defendant to execute said note defendant avers that said note was executed by him for funds advanced to him by the plaintiff for the purpose of producing a peanut crop in the year of 1943 in Bullock County, Alabama that at the time of the execution and delivery of said note it was agreed by and between the plaintiff and defendant that if said defendant used the proceeds advanced by plaintiff in the production of a peanut crop and applied the proceeds derived from the sale of said crop to the payment of said note that in the event the proceeds derived from the sale of said crop were insufficient to pay said note in full, then, in such event, the plaintiff would cancel such balance as might be due on said note and the defendant would not be indebted to the plaintiff for the balance; defendant avers that he did use the entire amount of funds advanced to him by the plaintiff for the production of a peanut crop in Bullock County, Alabama, and did pay over to the plaintiff the entire amount of funds derived from the sale of said peanut crop to the plaintiff and, that according to the terms of the contract between the parties, the defendant is not indebted to the plaintiff for the balance due on the note upon which the plaintiff's complaint is based.'

'10. The defendant for answer to said complaint and to each and every count thereof, saith: The note for the recovery of which suit is brought was executed for funds advanced to the defendant by the plaintiff for the purpose of producing a peanut crop in Bullock County, Alabama, in the year 1943; that he did produce such crop and in doing so used the amount advanced for producing the crop; provided for insurance on such crops to the extent and in the manner required by the plaintiff; diligently applied principles of good husbandry to the production of such crop; applied to the payment of the debt evidenced by the note an amount equal to all proceeds of such crops, including the proceeds of any incentive or other similar payments made by the United States Government on such crops and proceeds of insurance on such crops; and such amount has been insufficient to pay the advances in full. And defendant avers that according to the terms of the note upon which suit is brought he is entitled to a certificate from the United States Department of Agriculture War Board of Bullock County, Alabama, declaring that he is not liable for the balance due on said note; defendant avers that such certificate has not been granted to him due to the fact that the Board has failed or refused to act, or they are mistaken in their finding that he is not entitled to a certificate, or they have failed to exercise an honest judgment, and defendant further avers that he is entitled to a certificate relieving him of the debt evidenced by the note upon which suit is brought.'

STAKELY Justice.

In 1943 the United States Department of Agriculture through the Regional Agricultural Credit Corporation of Washington, D. C., a corporation (appellant) undertook to stimulate the production of certain crops, including peanuts, in connection with the war effort. The plan was to provide financing through loans to farmers who had land and facilities for producing such crops. The actual processing of the loans was delegated to the respective County War Boards of the United States Department of Agriculture, in this case the County War Board of Bullock County.

Cephus H. Hendley (appellee) made application to appellant for such a loan with the result that on February 16, 1943, he obtained a loan of $1,700 for which he executed his promissory note bearing such date and payable November 30, 1943. This note is the basis of count 1 of the complaint. Subsequently he obtained an additional advance of $400 for the purpose of gathering crops for which he executed his promissory note dated August 23, 1943, and payable November 30, 1943. The second note is the basis of count 2 of the complaint.

The foregoing notes each contained, among other provisions, the following which are set out in each count:

'The maker shall be personally liable for the full amount of such advances subject to the condition that if the United States Department of Agriculture War Board of the County identified by the State and County code appearing in the identification number on this note (or such other agency or person as the Regional Agricultural Credit Corporation of Washington, D. C., may designate to make the certification herein required) certifies that:

'1. The makers have used the amount advanced for producing the crops for the production of which advances were made;

'2. The makers have provided for insurance on such crops to the extent and in the manner required by the Regional Agricultural Credit Corporation of Washington, D. C., to protect its interest in such crops;

'3. The makers in good faith have diligently applied the principles of good husbandry to the production of such crops;

'4. The makers have applies to the repayment of the advances an amount equal to all proceeds of such crops, including the proceeds of any incentive or other similar payments made by the United States on such crops and the proceeds of any insurance on such crops; and,

'5. Such amount has been insufficient to repay in full, then the Regional Agricultural Credit Corporation of Washington, D. C., will not look to other assets of the makers for the repayment of that part of the advance which exceeds such proceeds but will cancel the maker's obligation for the balance of the advance.'

On December 11, 1943, the appellee paid $908.82 on the indebtedness evidenced by the notes. This suit is brought to recover the balance claimed to be due. It is conceded that the Bullock County War Board did not certify to the facts or conditions contained in the notes. Trial of the case resulted in a verdict and judgment for the defendant. The appellant, among other assignments, assigns as error the rulings of the court on various special pleas. The demurrers to these pleas were overruled.

The defense is centered around an effort to avoid the clause providing for certificate by the War Board of certain facts and conditions. The pleas of the defendant set up three bases for such defense, which may be summarized as follows: (a) The provisions for the certificate were not the true contract between the parties but on the contrary at the time of the execution and delivery of the note it was agreed that if the appellee used the proceeds of the loan in the production of a peanut crop, employed good husbandry and applied the proceeds from such crop to the payment of the note and such proceeds were insufficient to pay the note, appellant would cancel the note. It is claimed that defendant complied with such agreement and accordingly there was no unpaid indebtedness. This defense is sought to be set up in pleas 3 and 4. (b) The defendant was induced to sign the note through false and fraudulent representations pertaining to the clause to which reference has been made. This defense is sought to be set up in pleas 5, 6, 7, 8 and 9. (c) The action of the War Board in denying the certificate was a mistake or failure to exercise an honest judgment and the defendant was entitled to such a certificate. This defense was sought to be set up in plea 10.

It is obvious that plea 3, which will appear in the report of the case, sets up an agreement different from that contained in the note, because in the note nonliability on the note is predicated on certain facts and conditions certified to by the War Board. It is claimed, however, that plea 3 is good because the agreements therein alleged are a part of the consideration for the note and parol evidence is admissible to show the true consideration. See Wells v. Drane et al., 206 Ala. 583, 90 So. 898. We think, however, that this is a principle not here applicable. Parol evidence is not admissible where the effect would be to change or defeat the legal operation and effect of the instrument. Hardegree v. Riley, 219 Ala. 607, 122 So. 814; Kilgore v. Arant, 25 Ala.App. 356, 146 So. 540; First Nat. Bank of Guntersville v. Bain et al., 237 Ala. 580, 188 So. 64; Jackson v. Sample, 236 Ala. 486, 183 So. 646; Davenport & Harris Undertaking Co. v. Roberson, 219 Ala. 203, 121 So. 733; Scott v. McGill, 245 Ala. 256, 16 So.2d 866; 32 C.J.S., Evidence § 951, p. 880; 8 Am.Jur. p. 642. Plea 4 is substantially similar to plea 3 except that plea 4 undertakes to state the defense set up in plea 3 upon the theory that such defense will prevail when the entire contract between the parties is considered. It seems to us, however, that the agreements set forth in the note appear to be complete on their face and certainly the agreement alleged in the plea contradicts that set forth in the note. West & West v. Kelly's Ex'rs, 19 Ala. 353, 54 Am.Dec. 192; Scott v. McGill, supra. The demurrers to pleas 3 and 4, which were overruled, should have been sustained.

While differing in some detail in their allegations, pleas 5 through 9, inclusive, are based on the principle that execution of the notes by the defendant to the plaintiff was procured by...