Wood v. Phoenix Insurance Company

1. The Code, § 96-108, declares: "Where property is sold and delivered, but title is not to pass until payment in full of the purchase-money, and the property is lost, damaged, or destroyed without the vendee's fault, he is entitled to a rescission of the contract or to an abatement in the price, unless it is otherwise agreed in the contract of sale." In the instant case, the contract of sale provided that: "Vendor shall not be held liable for any loss or damage arising from delays or damages caused by fire or strikes, delays in transportation, or other causes beyond vendor's control." Held, that this stipulation was not such an agreement as would come within the proviso of the statute, "unless it is otherwise agreed in the contract of sale."

2. The clause of the contract referring to the amount of the purchase-price was rendered ambiguous by contradictory statements as to the amount, and this being true, the trial judge did not err in permitting the purchaser (defendant) to testify, in explanation of the ambiguity, that at the time she entered into the contract, she had a conversation with the seller's agent and that it was distinctly understood that the items of insurance, carrying charges, and interest were included.

(a) The rulings of the Court of Appeals, being contrary to the foregoing, were erroneous, and must be reversed.

No. 15111. JULY 3, 1945. The instant case is before this court on certiorari. Phoenix Insurance Company sued Mrs. H. T. Wood on a promissory note, dated May 31, 1940, payable to American Desk Manufacturing Company Inc., and transferred to the insurance company. The principal amount of the note was stated therein as $1962.72, "with interest from maturity at the rate of 10 per centum per annum, payable on demand as it accrues, . . the principal being payable in 36 equal consecutive monthly installments of $54.52 each, the first of such installments being due and payable on or before the 15th day of July A. D. 1940, and a like installment being due and payable on or before the 15th day of each succeeding month thereafter until the entire principal amount of this note, together with interest due thereon, is fully paid off and discharged." The defendant answered, admitting the execution of the note, and that the plaintiff was the legal holder thereof.

In paragraph 4 of her answer, the defendant alleged that on April 30, 1940, she signed a contract with American Desk Manufacturing Company, in which she agreed to purchase a certain number of opera chairs, and that on May 31, 1940, she executed the note sued on for the balance of the purchase-money of the chairs; that under the terms of the contract, the title to the chairs remained in the desk company until the entire purchase-price was paid; that the chairs were destroyed by fire in her moving-picture theatre on December 22, 1941, without her fault, and before the entire purchase-price was paid; that the plaintiff, as transferee of the desk company, had full knowledge of these facts when the note sued on was transferred to it; that under the terms of the contract, the title and right of possession of the chairs being in the desk company or its assigns, and the chairs having been destroyed by fire, without fault of the defendant, the contract was thereby rescinded and the defendant is not liable to the plaintiff in any sum.

In paragraph 5, the defendant pleaded the following provisions of the contract of April 30, 1940: (7) The purchaser agrees "to have said goods insured upon arrival at destination at purchaser's expense . . against damage by fire . . for an amount equal to the sum unpaid on the purchase-price thereof, the policy of insurance to be issued in vendor's name and for vendor's benefit." (14) "And in case said purchaser shall neglect and refuse to obtain said insurance . . the vendor herein may at its option obtain such insurance . . and all sums . . thus expended are hereby secured by these presents and shall be repayable . . upon demand from said vendor to said purchaser." She alleged that "she did not have the chairs insured, but that the vendor . . did have them insured under the terms and provisions of paragraph (14), above set forth, and collected the amount of the balance under the terms of said contract and note, and that the same was thereby paid in full and she is not indebted on said note and contract in any sum whatsoever."

In paragraph 6, it was alleged that the note given by the defendant to the desk company was for $302.72 more than the balance due on the chairs, "which difference of $302.72 defendant alleges included interest, premiums for insurance, and other incidental expenses connected with the said purchase of the chairs. . . Defendant alleges that the [vendor] did carry insurance on these chairs under the provisions of said contract and under agreement with defendant and [has] collected the full amount due [it] by defendant on said note and contract."

The defendant filed an amendment to which she attached a copy of the contract of April 30, 1940, paragraph 7 and 14 of which had been quoted in the answer. The clause in reference to the purchase-price was as follows:

"345 chairs, Style No. 1503, for each chair of this style the sum Quantity $6.03 Grand total of contract $2080.35

in cash herewith $420.35 on delivery and the balance on delivery of invoice with bill of lading attached as follows: Balance in 36 monthly payments of $54.52."

There was no other statement as to the consideration of the contract, or the amount of the purchase-money, or as to any additional charge, and the contract was entirely silent upon the subject of interest.

Paragraphs (6) and (16) of the contract, so far as here material, were as follows: "(6) That vendor shall not be held liable for any loss or damage arising from delays or damages caused by fire or strikes, delays in transportation, or other causes beyond vendor's control. . . (16) The purchaser further agrees that the title to all of said goods and chattels herein described and every part thereof, together with the right to possession thereof, shall remain in the vendor herein until full payment therefor in cash shall have been made as herein provided."

Paragraph 20 was as follows: "It is expressly understood that this order, with the specifications set forth, when accepted by vendor expresses the whole agreement, and there are no agreement or modifications of any kind in connection herewith which are not expressly set forth herein, and it is further agreed, that after this contract has been accepted by vendor, no agent of vendor shall have authority to change or alter this agreement, except by written authority from the general manager or president of vendor company."

On oral motion in the nature of a general demurrer, the judge struck paragraph 4 of the answer as amended. No attack was made on other parts of the answer or the amendment thereto.

On the trial, the defendant testified in part as follows: "This paper shown me is the original contract between me and the American Desk Manufacturing Company. I entered into that contract. I remember W. A. Pruitt Jr. He was agent for American Desk Manufacturing Company. This contract for the purchase of these chairs was made with him. As well as I remember, the matter of insurance on these chairs was discussed at the time we entered into this contract. The purchase-price of the chairs was to be $2080.35. I paid cash $420.35. Then I gave 36 notes for $54.52, payable monthly. The balance would be $2080.35 less $420.35, or $1660. The difference between this and the note for $1962.72, or $302.72, was for interest and carrying charges, which I thought the carrying charges were to include insurance. . . I had conversations with this man Pruitt. We discussed about insurance. When I gave this note for 1900-odd dollars it was definitely understood that the items of insurance, carrying charges, and interest were to be included in it. . . When the note was returned to me with the 302 dollars and some-odd cents in addition to the principal I understood at that time I was signing that amount to cover insurance. To the best of my recollection I should say Mr. Pruitt understood that too." This with other testimony of the defendant was objected to on the ground that it expressly varied the provisions of the written contract, and especially so in view of paragraphs 7, 14, and 20. The objection was overruled.

The defendant introduced in evidence, without objection, the note sued on, the contract of sale, insurance policy issued by the plaintiff to the desk company, and claim of the desk company and voucher in payment thereof by the insurance company. A witness for the plaintiff testified that he was secretary of the desk company, that he "serviced" the contract between his company and the defendant, and that the amount of the note sued on included only the balance due on the chairs plus interest and carrying charges, and included no charge for insurance. Additional testimony was introduced on both sides.

The policy of insurance issued by the Phoenix Insurance Company to the desk company provided: "No loss or damage shall be recoverable hereunder unless or until said loss or damage exceeds the interest of the vendee. In consideration of the rate at which this policy is issued, the assured warrants not to release the vendee or other party in possession from payment of any unpaid balance by reason of loss or damage. The assured warrants to make any reasonable efforts to collect the unpaid balance after any loss or damage, and upon failure to collect said unpaid balance, this company will advance the amount of the loss or damage to the property not exceeding the sum of the unpaid balance not more than sixty days past due, except that no claim shall attach under this insurance where the value of the salvage after any loss or damage equals or exceeds the amount of the unpaid balance due on the property. Upon making any advance this company shall thereupon become subrogated to all rights of recovery by the assured and such rights together with vendee's contract shall be assigned to this company by the assured on receiving said advance."

The jury found in favor of the defendant. The plaintiff moved for a new trial on the usual general grounds, and on one special ground assigning error on the overruling of its objections to the testimony of the defendant, to which reference has been made. The motion was overruled, and the plaintiff carried the case to the Court of Appeals. The defendant, by a cross-bill of exceptions, assigned error on the ruling of the judge striking paragraph 4 of her answer. The Court of Appeals reversed the judgment overruling the motion for a new trial, and affirmed the ruling striking paragraph 4 of the defendant's answer; and, in affirming the latter ruling, held that paragraph 6 of the contract of April 30, 1940, constituted such a contract as, under the Code, § 96-108, made the loss fall on the vendee, if the chairs in question were destroyed by fire while in her possession.

In reversing the judgment overruling the motion for a new trial, the Court of Appeals held that the testimony of the defendant as to the consideration of the note including charges for insurance was inadmissible, over the objection made; and that, with this "illegal testimony" excluded, the evidence demanded a finding for the plaintiff. Phoenix Insurance Co. v.Wood, 71 Ga. App. 769 (32 S.E.2d 262).

On petition of the defendant, this court granted a certiorari. 1. Under paragraph 16 of the contract, the title to the property was retained by the vendor until full payment of the purchase-money; while in paragraph 6, it was agreed that "vendor shall not be held liable for any loss or damage arising from delays or damages caused by fire or strikes, delays in transportation, or other causes beyond vendor's control."

The Code, § 96-108, declares: "Where property is sold and delivered, but title is not to pass until payment in full of the purchase-money, and the property is lost, damaged, or destroyed without the vendee's fault, he is entitled to a rescission of the contract or to an abatement in the price, unless it is otherwise agreed in the contract of sale." One of the questions presented is whether paragraph 6 of the contract is such an agreement as would come within the proviso of the statute, "unless it is otherwise agreed in the contract of sale." We are of the opinion that this question should be answered in the negative. The statute refers to a situation where the property has been "sold and delivered;" while paragraph 6 of the contract apparently had no other purpose than to absolve the seller from liability "for any loss or damage" for failure to deliver according to the contract, in the event that it was prevented from so doing by fire or strikes, delays in transportation, or other causes beyond its control. While we are not aware of any previous case in which the identical stipulation has appeared, agreements of this general type are not uncommon in contracts for the sale of property to be delivered in the future. The reports show, however, that they have generally been pleaded against claims for damages for failure to deliver according to the terms of the contract; and, except the present one, we do not know of any case that involved the question whether an agreement of this class would apply to a loss resulting from damage or destruction of the property after its delivery to the vendee. Nor, as we have indicated, do we think that the agreement here was intended to apply to such a situation. See generally in this connection,Empire Cotton Oil Co. v. Producers Co., 29 Ga. App. 111 (114 S.E. 74); Normandie Shirt Co. v. Eagle, 238 N.Y. 218 (144 N.E. 507, 35 A.L.R. 714); Dant v. Grays Harbor Exportation Co., 106 F.2d 911 (125 A.L.R. 1302); Dixie Portland Flour Co. v. Kelsay-Burns Mills Co., 86 Ind. App. 137 (155 N.E. 526); Leavenworth State Bank v. Cashmere AppleCo., 118 Wn. 356 (204 P. 5); Smokeless Fuel Co. v. Seaton,105 Va. 170 (52 S.E. 829); Hull Coal Coke Co. v. Empire Coal Coke Co., 51 C.C.A. 213 (113 Fed. 256).

In Avery v. Middlebrooks, 142 Ga. 830 (83 S.E. 944), cited for the plaintiff, the purchasers agreed to keep the property insured for at least one half of the purchase-money for the benefit of the sellers, and specifically guaranteed the sellers against any damage to the property by fire while it was in the buyers' possession. Accordingly, that case is distinguished by its facts from the instant case. Likewise, inMcKinney v. Battle, 13 Ga. App. 255 (79 S.E. 92), the agreement was materially different from the one here under consideration.

The Court of Appeals erred in affirming the ruling of the trial judge striking paragraph 4 of the defendant's answer.

2. The clause of the original contract referring to the amount of the purchase-price was as follows:

"345 chairs, Style No. 1503, for each chair of this style the sum Quantity $6.03 Grand total of contract $2080.35

in cash herewith $420.35 on delivery and the balance on delivery of invoice with bill of lading attached as follows: Balance in 36 monthly payments of $54.52."

The 36 monthly payments of $54.52 plus the cash payment of $420.35 would make a total of $2383.07. The contract thus in one place states the purchase-price as $2080.35, but immediately thereafter provides in effect that it shall be $2383.07; making a discrepancy of $302.72. Stated differently, the amount of the 36 monthly payments would be $1962.72, whereas, after deducting the cash payment from the amount first stated as the purchase-price, to wit, $2080.35, the balance would be only $1660, provided nothing was to be added. According to each calculation, there is a discrepancy of $302.72, which is not explained in the particular clause, nor by anything else contained in the contract. The amount of the note as sued on was $1962.72, that is, for the balance of the larger amount after deducting the cash payment; nor was the discrepancy explained in that instrument. In these circumstances, the clause in reference to the amount of the purchase-money was ambiguous; and this being true, the trial judge did not err in permitting the defendant to testify that at the time she entered into the contract with the desk company she had a conversation with W. A. Pruitt Jr., the company's agent, and that it was distinctly understood that the items of insurance, carrying charges, and interest were included. Code, §§ 20-704 (1), 38-502.

Ambiguity has been defined "as duplicity, indistinctness, an uncertainty of meaning or expression;" and we think it can not be gainsaid that this contract was rendered ambiguous by the contradictory statements as to the amount of the purchase-money.Novelty Hat Manufacturing Co. v. Wiseberg, 126 Ga. 800 (55 S.E. 923). Whether or not the testimony would have been admissible under the rule which permits inquiry into the consideration where it is stated merely by way of recital, it was admissible to explain the ambiguity. It is of course true that, if the consideration be stated in a written contract in such manner as to make it one of the terms or conditions of the agreement, a different consideration, whether variant or additional, can not be shown by parol (Wellmaker v. Wheatley,123 Ga. 201 (2) 51 S.E. 436; Brosseau v. Jacobs PharmacyCo., 147 Ga. 185, 93 S.E. 293; Ramsey-Fender Motor Co. v.Chapman, 46 Ga. App. 385 (2) 168 S.E. 92); but this rule in no wise limits or modifies the other rule as to the admissibility of parol evidence to explain ambiguities, latent or patent.

Nor, if testimony is otherwise admissible to explain an ambiguity, would it be rendered inadmissible by a stipulation in the contract to the effect that it expresses "the whole agreement," and that there is no agreement or modification of any kind in connection therewith that is not expressly set forth therein. In other words, if a contract is in fact ambiguous as to some matter, such a stipulation would not prevent explanation in the usual manner. Whether a stipulation could be so framed as to have that effect, manifestly the present one was not designed for any such purpose, and, therefore, evidence to explain the ambiguity would be admissible just as though no such stipulation had been made. Code, § 38-205; Hartwell Grocery Co. v. Mountain City MillCo., 8 Ga. App. 727 (70 S.E. 48); Porter v. SterlingProducts Co., 40 Ga. App. 522 (2) (150 S.E. 457); AtlantaChemical Co. v. Hardin Bag Co., 49 Ga. App. 748 (176 S.E. 772).

It follows that the trial judge properly admitted the testimony of the defendant over the objection urged, and that the Court of Appeals erred in ruling to the contrary, and in reversing the judgment refusing a new trial upon that ground.

Judgment reversed. Jenkins, P. J., Duckworth, Atkinson, andWyatt, JJ., concur.