Boyd Estate , 394 Pa. 225 ( 1958 )

Opinion by

Mr. Justice Benjamin R. Jones,

This is an appeal from a final adjudication of the Orphans’ Court .of Delaware County dismissing certain claims against the Estate of William G. Boyd and providing for the distribution of the estate. The claims arose out of a construction contract executed by Boyd (.herein called decedent) and one William B. Albright. Due to the number of litigants involved and the variety of legal questions presented, the facts pertinent to each claim and each claimant’s contentions will be discussed, separately, after a brief recital of the factual, background common to all the claims. .

,. On December 10, 1947, the decedent, and Albright, as a general contractor, entered into a written agreement whereby Albright was to perform certain construction work on a property owned by decedent for a consideration of $42,180. On January 9, 1948, a supplemental agreement was made providing for additional work in the amount of 115,82o.¹ Both sums were payable by decedent two months after the issuance of the Architect’s Certificate of Final Completion of the work, one Francis Jobson being employed by decedent as the architect. On April 10, 1948, after Albright had acknowledged in writing a default on his part under the above mentioned agreements, another contract was executed by the parties. Albright apparently admitted his default in order to induce decedent to apply for a construction mortgage in the amount of $45,000, the costs of obtaining which Al-bright agreed to assume, together with the payment of interest on the mortgage. It was also contemplated at this time that a permanent mortgage would subsequently be obtained in a larger amount. The consolidated agreement required that Albright perform the same construction work called for in the previous agreements for the same consideration of $58,000, but provided for payments on account of work completed and approved with a twenty per cent retention until two months after final completion of the work. Decedent then applied for a construction mortgage in the amount of $40,000.

On May 6, 1948, decedent executed and delivered to Albright a judgment note in the amount of $30,000 for the alleged purpose of raising sufficient funds to satisfy the sub-contractors. On June 4, 1948, settlement was held on the construction mortgage and the $40,000 was made available to decedent. Previous to the date of settlement, Albright had received $18,300 from decedent and he received an additional $26,576.79 from the mortgage fund, or total payments of $44,-876.79. However, judgment was entered on the note on April 1, 1949, and assigned to claimant Hoffman three days later. Upon this judgment, the claim of Hoffman is based.

In the spring of 1948, the sub-contractors ceased work and refused to continue until some, guarantee of payment was made to them. Negotiations between decedent, Albright, Jobson and some of the sub-contractors took place during the months of June, July and August of 1948. Appellant Guerrina contends that the result of these negotiations was the personal assumption by decedent of the amount due Guerrina under its contract with Albright and was to be paid from the funds of the permanent mortgage when it was secured. Appellant Parker maintains that a partial assignment was made to him by Albright of the amount that would be due Albright under his contract with decedent, that this represented a valid claim against decedent and should have been paid as' soon as the permanent mortgage was secured.

In April of 1949, Guerrina brought suit against decedent. On September 9, 1949, decedent filed a petition to open the judgment which had been assigned to Hoffman. On January 12, 1950, a permanent mortgage in the amount of $75,000 was obtained. After the construction mortgage had been satisfied a sum of approximately $35,000 remained which was ultimately used to reduce the permanent mortgage. Commencing in February of 1950, a number of attachment executions were issued against decedent and decedent was given notice of claims of other general creditors of Al-bright. These comprise the balance of the claims against the estate.

On November 27, 1951, Albright was adjudged a bankrupt and on March 29, 1954, decedent died. All of the claims involved in these appeals were filed against Ms estate. The trustee in bankruptcy and the Executor have agreed that the sum of $25,000 is due and owing as the balance under the construction contract between .decedent and Albright. The court below awarded this sum to the trustee and dismissed all the other claims against the estate without prejudice to them to proceed in the bankruptcy proceedings. These appeals followed.

Hoffman Claim

Hoffman’s claim is based upon the judgment against decedent assigned to him by Albright as security for work and materials which had been or were to be furnished by Hoffman for completion of the work. At the time of the assignment, Hoffman failed to obtain from Boyd a declaration of no setoff or counterclaim. The estate’s defense is an alleged oral agreement entered into at the time of execution of the note upon wMch judgment was entered. Judge C. William Kraft, Jr., win) at that time was decedent’s attorney, testified that at a meeting held subsequent to the execution and delivery of the note Albright, admitted that the note was to be used only for the purpose of-raising sufficient funds to continue operations and was to be considered paid when the amount received by Albright from decedent, particularly from the construction mortgage, equalled the face amount of the note. Judge Kraft’s testimony was substantiated by Joseph Guerrina, a sub-contractor, who testified that Albright admitted to him that the note was given only to insure the granting of the construction mortgage and it was to be paid from the first monies Albright received from decedent. On the other hand, Jobson, the architect, testified that it was his understanding that the note was to be paid at the completion of the job and that he made no record of any payments against the note in keeping the accounts between decedent and Albright. If the evidence introduced on behalf of the estate be admissible, it is obvious that the note had been paid at the time judgment was entered and this would constitute a valid defense both as against Albright and his assignee, Hoffman.

However, appellant Hoffman maintains that the introduction of oral testimony as to the conditions upon which the note was issued and the specification of the mode of payment constitute a violation of the parol evidence rule in that it alters and varies the terms of a written instrument intended by the parties to embody the complete agreement between them. In support of this argument, Hoffman relies primarily upon Speier v. Michelson, 303 Pa. 66, 154 A. 127, wherein, we stated that an allegation of an oral agreement to restrict the payment of a negotiable instrument to a specific fund would not constitute a sufficient defense to an action on the note because to permit evidence of such oral agreement would contradict the terms of the note bearing on its face an unqualified promise, to pay a specific amount of money. In any event, Hoffman argues that even if the evidence relied upon by the estate was admissible, such evidence is insufficient to establish the purported parol agreement.

Prior to Gianni v. Russell & Co., Inc., 281 Pa. 320, 126 A. 791, the parol evidence rule as applied by this Court and designated as the so-called Pennsylvania Rule was that the breach of a contemporaneous parol agreement which induced the execution of the written agreement constituted sufficient fraud to permit the introduction of the parol agreement. See IX Wigmore §2431 (c) (3d Ed.) and cases therein cited. However, in the Gianni case, this Court rejected the above rule and returned to the more conventional application, namely, that if the written agreement was intended by the parties to encompass the matter in dispute, then evidence of a contrary nature based upon an oral agreement at the time of the execution of the written agreement was barred in the absence of fraud, accident or mistake: Anderson v. Murdock Storage & Transfer Company, Inc., 371 Pa. 212, 88 A. 2d 720; T. W. Phillips Gas and Oil Company v. Kline, 368 Pa. 516, 84 A. 2d 301; Grubb v. Rockey, 366 Pa. 592, 79 A. 2d 255. As applied to negotiable instruments, this rule prevented the introduction of a contemporaneous agreement to show that payment was to be made, from the proceeds of a particular fund, or that payment would not be demanded until the happening of a specified event. Rosenblum & Co. v. Rosenblum, 313 Pa. 49, 169 A. 79; Architectural Tile Co. v. McSorley, 311 Pa. 299, 166 A. 913; Speier v. Michelson, supra; Hein v. Fetzer, 301 Pa. 403, 152 A. 388; Yorkshire Worsted Mills v. Braman, 115 Pa. Superior Ct. 333, 175 A. 726.

Plowever, the parol evidence rule has never barred the introduction of clear, precise and convincing evidence to show that the party who. seeks to enforce the written agreement according to its . tenor has admitted and acknowledged that the agreement as written did not express what the parties intended and that what the- parties intended was omitted from the written agreement by mistake or accident: Allinger v. Melvin, 315 Pa. 298, 172 A. 712; Newland v. Lehigh Valley R.R. Co., 315 Pa. 193, 173 A. 822; Bryant v. Bryant et al., 295 Pa. 146, 153, 144 A. 904; Ward v. Zeigler, 285 Pa. 557, 132 A. 798; Howell et ux. v. Wheelock, 115 Pa. Superior Ct. 599, 176 A. 252; Frederick Estate, 156 Pa. Superior Ct. 547, 553, 41 A. 2d 59. In the Allinger case this rule was applied to a factual situation somewhat similar to the present situation. There defendant had executed an unconditional bond and mortgage. A judgment entered on the bond was subsequently assigned to the plaintiff who failed to obtain a declaration of no set-off or counterclaim. On a petition to open the judgment it was alleged that the parties had a contemporaneous parol agreement limiting the bond to the mortgaged property. The court below permitted the assignor to testify that he and the defendant had this contemporaneous parol agreement. The court stated, at page 304: “The principle governing the decision in Gianni v. Russell, 281 Pa. 320, 126 A. 791 (in which case the evidence in support of the oral agreement was not, as here, uncontradicted), and cases following it, on which appellant relies, has no application to a record like this. Those cases hold that ‘if the matter proposed to be shown by parol is the subject of a covenant in the agreement, which is complete, such evidence to alter its terms cannot be received’ (Cridge’s Est., 289 Pa. 331, 338, 137 A. 455), unless it is admitted that the whole of the agreement is not set forth in the writing: Ward v. Zeigler, 285 Pa. 557, 132 A. 798”. (Emphasis supplied). The rule enunciated in the Allinger case governs the present situation. Both Judge Kraft and the subcontractor, Guerrina, testified that Albright admitted that the note was to be considered paid from the first moneys Albright was to, and did, in fact, receive from the decedent.² In proceedings to open the judgment entered upon the note — at a time when both parties were living — Albright not only failed to take the stand to deny the agreement between the parties but in his sworn answer substantially admitted such an understanding. Although the record in the present case is not as strong as that in the Allinger case in that therein the assignor himself testified and admitted the terms of the contemporaneous agreement while instantly the admission was proven by testimony found to be clear, precise and convincing by the court below, we believe that the evidence is such as to bring it within the AlVmger rule and that such testimony is not excluded by the parol evidence rule. That rule is aimed at the prevention of, not the protection, of fraud.

The claim of Hoffman³ is accordingly dismissed without prejudice to him to pursue his claim for work and materials in the bankruptcy proceedings.

Guerrina Claim

The claim of Alex Guerrina & Sons, Inc. (hereinafter called Guerrina) is based upon an alleged agreement between decedent and Guerrina that if Guerrina would complete the masonry work it would be paid directly out of the permanent mortgage when it was secured. There is no dispute that the work was satisfactorily completed in September of 1948 and that $8,-470.10 is still due Guerrina. The evidence introduced to prove this claim consists of a number of letters between the parties and purported statements of decedent. The estate, however, contends that the only agreement to pay Guerrina directly from the proceeds of the permanent mortgage was made by the architect, Jobson,. who had no authority to bind decedent. An examination of the correspondence and conferences upon which the purported agreement is based is necessary for a determination of the validity of the claim.

•' On January 22, 1948, Albright accepted Guerrina’s bid to perform, as a sub-contractor, the masonry work required by the contract between decedent, and.Al-bright. In the early spring of 1948, Guerrina, apparently fearful of Albright’s financial, status, ceased work: and-refused to continue until it received compensation for the portion, of .work it had performed together with a guarantee that interim payments would be made to it as the work progressed, although its contract with Albright called for payment only upon completion. This impasse resulted in a conference on June 21, 1948, between Jobson, Albright, Guerrina and a Mr. Christy, Guerrina’s attorney. As a consequence of-this meeting, Christy forwarded to Jobson a letter dated June 21,1948, prepared for the signature of both Albright and decedent, or his attorney, which purported to reduce to writing the results achieved at the conference. This agreement, which would have imposed direct liability upon decedent for any sums owed or that would be due from Albright to Guerrina, was never signed by any of the parties. On June 23, Job-son replied to Christy’s letter setting forth the conditions upon which the work was to continue and the manner in which Guerrina was to be paid. Upon this letter the claim of Guerrina is in a large measure based.

In this letter, Jobson agreed to authorize certain payments to Guerrina for work performed and final payment from the contemplated final 'mortgage. In addition, he specifically negated any authority from decedent to approve any arrangements for payment or to enter into any agreement for payment of Guerrina directly because “that is contrary to any contracts signed by Mr. Boyd with Mr. Albright.” On July 12, Jobson advised Guerrina that he considered it to be in breach of the contract between it and Al-bright since that contract did not call for interim payments and that, unless work was resumed, the masonry work would be completed by another contractor. On July 13, Jobson forwarded to Albright a letter approved by decedent which authorized Jobson to make payments directly to Guerrina from the proposed mortgage fund. This authorization was signed by Albright and subsequently returned to Jobson. In a letter to Guerrina on July 15, Jobson reduced to writing the results of the negotiations between them, namely, that payment would be made from the mortgage funds by vouchers issued by Jobson and authorized by Albright.

On August 10 or 11, a final meeting attended by decedent, Jobson and Guerrina was held. Certain additional work not covered by the contract between decedent and Albright was ordered by Jobson and approved by decedent. On the first of five purchase orders authorizing extra work was the statement that: “The above work shall be done and shall be billed as above and to be settled at the completion of the work out of funds to be made available at final settlement in addition to other balances owing, and shall be covered in letter dated June 23, 1948.” Guerrina contends that from this statement and Jobson’s testimony as to what took place at this meeting can be found decedent’s consent to guarantee payment directly to Guerrina for all sums that might be due at the completion of its contract. We are unable to agree with this conclusion.

The letter of June 23 contemplated only an agreement on Albright’s part to authorize payments directly to Guerrina from the funds of the permanent mort gage which would be due Albright at the completion of the work. This letter specifically denied the direct personal liability of Boyd or his attorney to Guerrina and it represented only a partial assignment by Al-bright of the funds that would be due him when final settlement was made. The agreement was consummated by Jobson’s letter of July 15 to Guerrina after he had secured decedent’s approval and Albright’s written authorization to make the assignment.

The statement on the first purchase order does not vary the legal effect of Jobson’s letter of the 23rd negating direct personal liability on the part of Boyd. At most, it manifests a willingness on decedent’s part to be held directly liable for the additional work approved by him and receipt of further notice and acceptance of the partial assignment as set forth in the letter of the 23rd and confirmed in the letter of the 15th to Guerrina.⁴ This was substantiated by Job-son’s testimony as to the final understanding reached by the parties at the meeting that took place on August 10 or 11. Jobson testified that he did not have any authority from decedent to make any direct commitment on his behalf to assume personal responsibility for the claim, but only to divert directly to Guerrina with Albright’s approval whatever sum from the permanent mortgage would be due Albright under the contract.

The evidence proves only that decedent guaranteed Guerrina that Albright would pay Guerrina directly from the proceeds of the construction mortgage when those funds were made available to Albright by virtue of his completion of the contract with decedent. In accordance with this understanding, Jobson was authorized by Albright to make payments directly to Guerrina. Albright, however, could only authorize payment from that portion of the fund to which he was entitled by virtue of his completion of the contract. That Albright never became entitled to the full amount of the mortgage and that final settlement of the conflicting claims between decedent and Albright has not been consummated does not lead to the conclusion that Guerrina has a claim against decedent or his estate directly.

Appellant also relies on the testimony of one Louis Campagna, an employee of Guerrina, who stated that decedent, in April or May, 1948, assured him that Guerrina would be paid for the work. The purported promise was never shown to have been communicated to any officer of the corporation, nor did the promise ever ripen into any agreement between Guerrina and decedent, except as the later negotiations between the parties have been so interpreted by appellant.

Appellant finally contends that a statement to the effect that “the claims of Hoffman, Guerrina, Parker and McMahon must be paid [from the mortgage funds]” in a letter dated December 19, 1949 from Judge Kraft to Harry A. Rutenberg, Albright’s attorney, was a clear confirmation of what had been agreed upon in the negotiations between the parties in June, July and August of 1948; that is, that decedent would be directly liable for payment to Guerrina out of the mortgage fund. In addition to the fact that we are of the opinion that no such intention was manifested by decedent in these negotiations, an examination of the circumstances under which the letter was written discloses a further reason for the rejection of this contention. This letter was written in an attempt to settle the dispute existing between Albright and decedent in order to complete the contract. At the time it was written, Guerrina had filed suit against decedent and the judgment assigned to Hoffman was still in effect. The obvious intent of the statement in Judge Kraft’s letter was to direct Albright as a condition to final settlement to satisfy the creditors directly from the mortgage in order to relieve decedent from the possibility of further complications. It did not confirm the assumption of personal liability on the part of Boyd for the benefit of the sub-contractors.

For the above reasons, we hold that decedent did not agree to pay Guerrina directly out of the proposed mortgage fund, but that the negotiations between Job-son, Albright and Guerrina resulted in a partial assignment in the amount of f8,470.10 of the sum that would be due Albright at the completion of the contract.

Parker Claim

The claim of Parker, the plumbing and heating subcontractor under the contract between Albright and decedent, is based upon a partial assignment by Al-bright of the amount that would be due him at the completion of his contract with decedent. A formal assignment was executed January 10, 1950 and was accepted On the same date by Judge Kraft as decedent’s attorney. However, appellant Parker argues that the assignment became effective on July 28, 1948, by virtue of a letter from Jobson to Parker, approved by decedent, setting ■ forth substantially the same guarantee and conditions for payment as contained in the letters of June 23 and July 15 in the Guerrina claim. The letter provided that payment would be made directly to Parker by voucher issued by Jobson on Albright’s authorization against the amount that would be due Al-bright upon completion of the contract. The court below, without passing upon the validity of this contention held that although there was an assignment:from Albright to Parker at least as of January 10, 1950, Parker’s claim was against the bankrupt estate of Ah bright and that all questions relating to its payment were to be determined in the bankruptcy proceedings. We believe that the letter of July 28 represented a partial assignment to Parker and that notice of acceptance of the assignment' on decedent’s part is clear.

However, the ultimate question for our determination is whether the claim is payable directly from the sum agreed to be owed by decedent to Albright or whether Parker must proceed through the trustee in bankruptcy. Since there is no question of Albright’s execution of a valid partial assignment to Parker long prior to the four month period preceding the bankruptcy of Albright, there is no reason to award the sum due Parker to the trustee in bankruptcy. Al-bright, by his assignment to Parker, divested himself of that portion of the final amount that would be due him under the contract and, in the absence of a voidable preference, the trustee in bankruptcy cannot bé placed in any more favorable position than the bankrupt, Albright, would have been. Wood v. Kerkeslager, 225 Pa. 296, 74 A. 174; Montgomery v. City of Philadelphia, 253 Fed. 473. We, therefore hold that appellant Parker is entitled to receive payment from the sum of $25,000 presently held by the estate as final settlement under the contract between decedent and Albright.⁵ However, since the payment of the Parker claim was contingent upon final settlement between Boyd and Albright at the completion of the contract and not merely upon the placing of the permanent mortgage, the interest claimed by Parker from the date of the mortgage settlement to the date Albright was adjudged a bankrupt is denied.

Other Claimants

, The remaining claimants were creditors of William B. Albright. A number of them secured judgments against him in the Court of Common Pleas of Delaware County. Writs of attachment execution were served on decedent as garnishee, but the adjudication of Albright as a bankrupt stayed the attachment execution proceedings. The court below held that there was no individual liability on the part of decedent’s estate for the payment of the claims, and the claimants were relegated to the bankruptcy court for satisfaction.

An attachment execution works an assignment to the plaintiff of the debt due the defendant from the garnishee. . The rights of the attaching creditor are the same as the rights of the defendant in the writ. Trainer Estate, 166 Pa. Superior Ct. 472, 71 A. 2d 833, and cases therein cited; Sniderman et al. v. Nerone et al., 136 Pa. Superior Ct. 381, 7 A. 2d 496. At the time the writs were served, these claimants had a valid claim upon the fund which decedent owed Albright for the completion of the contract. Since all of the attachments were in effect prior to the four month preferential period provided for in the bankruptcy act, and, since their validity is unchallenged, the bankruptcy court lacks jurisdiction to enjoin the attaching creditors. Straton v. New, 283 U. S. 318, 75 L. ed. 1060, 51 S. Ct. 465.⁶ We can see no legitimate grounds for subjecting these claimants to the additional delay and expense that would be involved in proceeding through the trustee in bankruptcy when they have a valid enforceable claim against decedent’s estate in a court having proper jurisdiction over the funds in question. See McCahan's Estate, 312 Pa. 515, 168 A. 685.

Certain other claims, not yet reduced to judgment, were presented on behalf of other sub-contractors to whom Albright was indebted for work performed in connection with the master contract. Since these claims are not predicated upon any personal liability of decedent, the court below properly held that the correct forum for determination of their validity was the bankruptcy court.

The settlement by the trustee in bankruptcy for Albright and the executor of decedent’s estate of the conflicting claims arising from the master contract between these two parties in the amount of $25,000 is approved.

The case is remanded to the Orphans’ Court of Delaware County for a determination of the priority and payment of the claims held to be valid. Any sum remaining after payment of these claims is to be awarded to the trustee in bankruptcy.

Decree modified and, as modified, affirmed. Costs on appellants in Appeals Nos. 72, 91 and 136 January Term, 1958. Costs on the estate in Appeals Nos. 96, 101, 132, 133.

1 A prior agreement, contingent upon receipt of the proceeds of a construction mortgage which was never obtained, had been executed on October 7, 1947. This agreement was rescinded in writing on December 10, 1947.

2 The only testimony that could be considered contrary to the existence of this agreement was that of the architect, Jobson, who testified as to what he himself believed was the agreement between the parties. Jobson also testified that it was his understanding that a permanent mortgage in the amount of $40,000 was to be secured upon the completion of the job, and that no other mortgage was contemplated. This was in clear contradiction to the testimony of other witnesses and the events that subsequently developed.

3 The estate also disputed the claim on the grounds that the assignment was taken by Hoffman individually, but that the amount claimed included debts owed and money advanced by both Hoffman and the Hoffman Humber Co., a corporation. In view of the result that we have reached, we need not pass upon the efficacy of this contention.

4 These purchase orders for extras were the subject of a Mechanic’s Tien Claim as of No. 17 March Term, 1949, Mechanics’ Tien Docket, Court of Common Pleas of Delaware County, which claim has been satisfied of record by payment in full.

5 This conclusion obviously applies with equal force to the Guerrina claim.

6 See In Re Hudzinski, 85 F. Supp. 341, 343: “If tlie execution had been issued on a judgment against the bankrupt so that possession was in the state court, more than four months prior to bankruptcy, it would be improper to stay the execution.”