A mortgage to defendant to secure the payment of $4,000, with interest, according to the terms and conditions of three promissory notes of specified dates and amounts and times of payment, covering the mortgagor's described realty and providing against foreclosure within two years, under seal, signed by the mortgagors, executed on the same day with an agreement between plaintiff, a creditor, and the mortgagor, and defendant, the mortgagee, and with a chattel mortgage on timber executed to plaintiff, in the absence of fraud or mistake, could not be varied or enlarged by showing that defendant, to obtain his additional security, promised the mortgagors to pay $1,000 on their indebtedness to plaintiff, in view of the fact that the purpose of the mortgage was not to convey with a defeasance, but to evidence a contract of security, as the contract itself might be resorted to as the source of authority for receiving parol evidence, and since it showed a formal and deliberately complete agreement, parol evidence to enlarge its scope was inadmissible. [Ed. Note. For other cases, see Evidence, Cent. Dig. §§ 1912-1928; Dec. Dig. 419.] PAROL EVIDENCE 8. MORTGAGES 37 DEED AS MORTGAGE. It is competent to prove by parol evidence that a deed absolute on its face was intended as a mortgage, that being an exception to the general rule against excluding parol evidence. [Ed. Note. For other cases, see Mortgages, Cent. Dig. § 97-107; Dec. Dig. 37.] 9. EVIDENCE 433, 434-PAROL EVIDENCEWRITTEN CONTRACT-FRAUD OR MISTAKE. It is competent to show fraud or mistake by parol evidence opening the door to the fullest investigation as to the real intention of the parties to a written contract, and so defeat or reform it; that being an exception to the general rule excluding parol evidence. [Ed. Note. For other cases, see Evidence, Cent. Dig. 88 1990-2020; Dec. Dig. 433, 434.] ELLIS, J. Action upon an alleged promise of the defendant to pay to the plaintiff $1,000 on an indebtedness owing from John and George England, loggers, doing business as England Bros., to the plaintiff. The material facts are as follows: In the year 1912, the England Bros., were engaged in logging certain lands in Pierce county. To finance these operations they borrowed from the defendant Darnell $4,000, evidenced by three promissory notes-one for $1,500, dated June 14, 1912, due one year after date, with interest at 7 per cent., payable semi-annually; one for $1,000, dated July 1, 1912, due on or before one year after date, with interest at 7 per cent. per annum, payable at maturity; and the third for $1,500, dated October 2, 1912, due six months after date, with interest at 8 per cent. per annum, payable at maturity. The first two notes were executed by both of the Englands and their respec tive wives, the third by George England and wife. At the time of the giving of the first of these notes the England Bros. gave a bill of sale of the timber to the defendant, by the terms of which they were permitted to cut and remove the timber. Operations continued under this agreement and a supplemental agreement of May 26, 1913, not now material, until the middle of June, 1913, but nothing was realized over and above the expense of operation to apply on the indebted ness. In the meantime the Englands had become indebted to the plaintiff Union Machinery & Supply Company for logging equipment in a sum approximating $3,000. The plaintiff was urging payment. Shortly prior to June 16, 1913, the defendant's notes being wholly unpaid, except six months interest on the first, the first and last notes being due, and much of the timber having been removed, the defendant went to John England's home and had a conference with England and his wife, which resulted in their giving to the defendant a mortgage on their home to secure the three notes. This mortgage was executed on June 16, 1913, and, omitting caption and acknowledgment, reads as follows: "The mortgagors, John England and Mary E. England, his wife, mortgage to Jas. K. Darnell to secure the payment of $4,000 lawful money of the United States, together with interest thereon at the rate of 7 and 8 per cent. per annum until paid, according to the terms and conditions of three certain promissory notes, dated June 14, 1912, July 1, 1912, and October 2, 1912, respectively for $1,500.00, $1,000.00 and $1,500.00 respectively payable on or before one year after date on or before one year after date and on or before six months after date, respectively, with interest at 7%, 7%, and 8% respectively to the order of Jas. K. Darnell the following described real estate lot thirteen, block eleven in Seaview Park situated in the county of King, state of Washington. "This mortgage shall not be foreclosed before two years from this date. "Dated this 16th day of June 1913. "John England. [Seal.] "Mary E. England. [Seal.]" For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes On the same day and admittedly for the purpose of enabling England Bros. to continue their logging operations the England Bros. and the defendant entered into an agreement in writing with the plaintiff, signed by all of them, which, after reciting the indebtedness of England Bros. to the plaintiff, and that the plaintiff had declined to extend further credit without security, provided as follows: rent labor bills. "That the boom of logs now in the water adjacent to said camp may be sold by them and the proceeds employed in the liquidation of cur"That the next three booms of logs shall be handled by the Union Machinery & Supply Company, sold by them, and out of the proceeds they shall retain $1,000 in cash on each of said three booms, and that after paying the expenses of transportation and sale the balance shall be paid by the Union Machinery & Supply Company to the order of said England Bros. and J. K. Dar nell. "Said $3,000 shall apply on the indebtedness of England Bros. to the Union Machinery & Supply Company." ment was inadmissible in that it tended to change, vary, and enlarge the terms of a written contract complete and unambiguous on its face. [1, 2] 1.. The law is well settled in this state that a promise for a valuable consideration made by one person to another to pay such other's debt to a third person is an original undertaking of the promisor, and is not such a promise to pay the debt of another as to come under the ban of the statute of frauds, though resting in parol. Nordby v. Winsor, 24 Wash. 535, 64 Pac. 726; Dimmick v. Collins, 24 Wash. 78, 63 Pac. 1101. It is also well settled that in such a case the third person may sue the first directly upon the promise as one made for his benefit. Nordby v. Winsor, supra; Johnson v. Shuey, 40 Wash. 22, 29, 30, 82 Pac. 123. The first point raised is without merit. [3] 2. But it does not follow that every such promise may be proved by parol evidence. If the promise is asserted to have been made as a part of a transaction which is evidenced by a formal written contract complete and unambiguous upon its face, it is elementary that, as between the parties to the writing, parol evidence would be inad On the same day the England Bros. and Darnell gave to the plaintiff a chattel mortgage on the timber in question. Apparently Darnell signed this agreement and chattel mortgage to give them precedence over his prior chattel mortgage on the timber. There-missible to prove any additional promise after the Englands sold one boom of logs, the which would tend to contradict, vary, or enplaintiff a second boom, and the third was large the terms, scope, or purpose of the disposed of by the Seattle Merchants' & written contract. Ross v. Portland Coffee & Credit Men's Association by common consent | Spice Co., 30 Wash. 647, 652, 71 Pac. 184; of the creditors of England Bros., including Allen v. Farmers' & Merchants' Bank, 76 the plaintiff. On July 17, 1914, plaintiff Wash. 51, 58, 135 Pac. 621. The same rule brought this action, alleging that on June 16, excluding parol testimony which applies as 1913, when John England and wife gave the between the parties to a written contract apabove-mentioned mortgage to the defendant plies with like force to a third person whenas additional security for the three notes, the ever he claims as a beneficiary under a condefendant, for the purpose of securing such tract, bases his claim upon it or seeks to asadditional security and keeping the logging | sert rights which originate in the contractucamp running, promised England and wife to al relation created by it. All rights primaripay to the plaintiff the sum of $1,000 to ap- ly arising from the negotiations on which the ply on their indebtedness to the plaintiff. | written instrument rests, by whomsoever asThis alleged promise is the basis of the ac- serted, are merged in the writing. The fountion. At the trial the plaintiff was permitted, tain cannot rise higher than its source. over objection, to introduce the testimony of such a case the third person who claims that John England and wife and their daughter the promise was made for his benefit is afto the effect that as a consideration for the fected by the same principles of estoppel to execution of the mortgage the defendant vary the contract as evidenced by the writpromised to pay $1,000 of the indebtedness ing as affect the party who claims to have of the England Bros. to the plaintiff. The de- paid the consideration for the promise. fendant denied that any such promise was Jones, after indicating that the general rule made, and testified in substance that the excluding parol testimony to vary a written mortgage embodied the whole agreement be- contract does not apply as against strangers tween him and the Englands, and that the to the instrument, says: contract and chattel mortgage above referred to embodied the whole agreement between him and the plaintiff. The trial resulted in a verdict and judgment for the plaintiff. The defendant appeals. The record and the assigned errors sufficiently present two contentions: (1) That the alleged contemporaneous agreement contravened the statute of frauds in that it was an undertaking to answer for the debt of another and was not in writing; (2) that the In "It is to be observed, however, that the right of a stranger to vary a written contract by parol is limited to rights which are independent of the instrument. So that where one, although not a party to the instrument, bases his claim upon it, and seeks to render it effective in his favor as against the other party to the action, established by it, or which is founded upon it, by enforcing a right originating in the relation the parol evidence rule applies." 3 Jones, Commentaries on Evidence, § 449, p. 220. The following authorities amply sustain and exemplify the exception as stated: Sayre 3 separate receipt for the money; hence it is open to explanation by parol evidence. Jones, Commentaries on Evidence, § 469. Minneapolis, etc., Ry. Co. v. Home Ins. Co., | eration clause is of no greater force than a 55 Minn. 236, 56 N. W. 815, 22 L. R. A. 390; Current v. Muir, 99 Minn. 1, 108 N. W. 870; Schneider v. Kirkpatrick, 80 Mo. App. 145; Selchow v. Stymus, 26 Hun (N. Y.) 145; Hankinson v. Riker, 10 Misc. Rep. 185, 30 N. Y. Supp. 1040; Schultz v. Plankington Bank, 141 Ill. 116, 30 N. E. 346, 33 Am. St. Rep. 290; Wodock v. Robinson, 148 Pa. 503, 24 Atl. 73. For an antithetical case stating this exception and illustrating its limits, see our own decision in the case of Ransom v. Wickstrom & Co., 84 Wash. 419, 146 Pac. 1041. [4] As to the foregoing propositions there can hardly be a divergence of opinion. But the respondent contends that the real consideration for a written contract can always be shown, that evidence of the parol contemporaneous promise of the mortgagee in this case to pay $1,000 of the mortgagor's debt to it as an additional consideration for the mortgage, was therefore admissible, or as respondent, in substance, puts it: The execution of security for appellant's notes was the consideration for the promise, which comes to the same thing. Though an additional consideration not inconsistent with that expressed in the written contract may usually be proved by parol evidence, it is not competent as between the parties to a writing, under the guise of proving an additional consideration, to ingraft upon a written agreement, complete and unambiguous on its face, new terms, conditions, and covenants by parol. Smith Sand & Gravel Co. v. Corbin, 81 Wash. 494, 500, 142 Pac. 1163; Morris v. Healy Lumber Co., 46 Wash. 686, 691, 91 Pac. 186; Gordon v. Parke & Lacy Machinery Co., 10 Wash. 18, 38 Pac. 755; Kingsland v. Haines, 62 App. Div. 146, 70 N. Y. Supp. 873; Adams v. Watkins, 103 Mich. 431, 61 N. W. 774; Jackson v. Chicago, etc., R. Co., 54 Mo. App. 636; Walter v. Dearing (Tex. Civ. App.) 65 S. W. 380; Kahn v. Kahn, 94 Tex. 114, 58 S. W. 825; 17 Cyc. p. 659. [5] This is because the prime purpose of a deed is to convey title, and any explanation or variation of the consideration expressed, short of proving that the deed was without consideration, does not tend to defeat that purpose. Ordway v. Downey, supra; Windsor v. St. Paul, etc., Ry. Co., supra. The same rule and reason applies in case of a bill of sale of personalty. Don Yook v. Washington Mill Co., supra; Van Lehn v. Morse, 16 Wash. 219, 47 Pac. 435; Gilmore v. Skookum Box Factory, 20 Wash. 703, 56 Pac. 934. It is a matter of common knowledge that in conveyancing, the acknowledged consideration in the deed is often, and it may be said, usually not the real consideration paid or agreed to be paid. McCrea v. Purmort, 16 Wend. (N. Y.) 460, 30 Am. Dec. 103. [6, 7] But where, as in this state, a mortgage is not a conveyance with a defeasance as it was at common law, but is the mere written evidence of a contract of security, its prime purpose being to secure a debt, it seems to us that when the parties have specifically described the debt by stating the amount, as evidenced by specific notes, rate of interest, time of payment, and all the terms essential to a complete and unambiguous agreement, the recital of the amount and character of the debt should be held as invulnerable to parol attack as any other of the terms of the instrument, so long as the integrity of the instrument is not assailed for fraud nor a reformation sought for mistake. Such recitals as those found here are not mere “inattentive recitals common in conveyancing." They evidence, by their very particularity of description of the notes secured, a contractual intention as binding as any other contract. "It is a universal rule that the written contract itself must be resorted to as the source of where, as here, the contract shows a deliberate authority for receiving parol evidence, and agreement complete in itself and formally executed, parol evidence to enlarge its scope or vary ers' & Merchants' Bank, 76 Wash. 51, 58, 135 its terms is never admissible." Allen v. FarmPac. 621, 624; Gordon v. Parke & Lacy Machinery Co., supra; Farley v. Letterman, 152 Pac. 515. As sustaining the admissibility of evidence of a contemporaneous parol agreement as an added consideration of a written contract, respondent cites four of our own decisions: Don Yook v. Washington Mill Co., 16 Wash. 459, 47 Pac. 964; Johnston v. McCart, 24 Wash. 19, 63 Pac. 1121; Ordway v. Downey, 18 Wash. 412, 51 Pac. 1047, 52 Pac. 228, 63 To this rule neither a deed nor a mortgage Am. St. Rep. 892; Windsor v. St. Paul, etc., is any exception. 6 Am. & Eng. Encyc. Law Ry. Co., 37 Wash. 156, 79 Pac. 613, 3 Ann. (2d Ed.) p. 775. Even in case of a deed when Cas. 62. An examination of these cases dis- the statement of the consideration passes closes the fact that the first two involve beyond the mere recitative acknowledgment bills of sale of personalty, and the last two of payment of money, common in conveyancdeeds conveying real estate. The tendency ing, and enters into specific details and conof modern authority is towards the doctrine ditions stipulating special terms evidencing that the effect of the acknowledgment of not merely an intent to convey land, but payment of a given consideration in a deed to contract with reference to the considerais only to estop the grantor from asserting tion, such recitals bind the parties, and if a total lack of consideration, and thus de- complete on their face, can no more be alterfeating the deed, and that the usual consid-ed, varied, enlarged, or controlled by parol evidence of a contemporaneous oral agree-were, given, there was an agreement entered inment than other contracts. Jackson v. Chisago, etc., R. Co., supra. In the case last cited Judge Ellison, speaking for the court, says: "All written contracts, complete and definite, speak for themselves, and they cannot be altered, added to, or subtracted from, by oral testimony. This is an absolute rule of evidence adopted from motives of policy and founded upon the experience of mankind in dealing with the 'slippery memory' of men. So that it must follow that if parties express their contracts, as to the consideration, in terms which show that it is a contract, then, if complete upon its face, it can no more be altered or varied than any other contract. Whenever the statement of the consideration leaves the field of mere recital and enters into that of contract, as shown by the intention of the parties to be gathered from the instrument, it is no longer open to contradiction. This may be illustrated: Suppose the consideration in a deed should be: In consideration of the sum of $1,000 to be paid to me in beef cattle, weighing not less than 1,200 pounds each, at five cents per pound.' Would it be contended that a consideration thus expressed contractually could be orally shown to be other than as expressed? * But money may also be contracted for as the consideration in a written contract. And when the intention to so contract * is disclosed by the written instrument, no other or additional consideration can be shown. Thus, suppose that the consideration was stated in the written contract to be $1,000 to be paid as follows: Two hundred dollars in 6 months from date without interest, $400 in 12 months from date with 3 per cent. interest, and $400 in 18 months from date with 10 per cent. interest from maturity, all to be secured by a mortgage' on certain described property. Could it be shown in contradiction to this that the consideration agreed upon was 50 head of cattle or an additional sum of money? Clearly not. The reason is that it has been contracted otherwise by the parties, and that contract has been reduced to writing.' Where a deed recited the consideration as the payment of a certain sum of money and the assumption by the grantee of certain specifically described debts of the grantor, it was held that the statement of the consideration was contractual, and that parol evidence was not admissible to show the assumption of other debts as an additional consideration. Walter v. Dearing, supra. See, also, Kahn v. Kahn, supra; Baum v. Lynn, 72 Miss. 932, 18 South. 428, 30 L. R. A. 441; Hubbard v. Marshall, 50 Wis. 322, 6 N. W. 497. The better considered authorities hold, and it seems to us a fortiori, that the same rule applies to mortgages. While we have found no case an exact parallel to the one before us on the facts, there are many which announce the governing principle. In Dyar v. Walton, Whann & Co., 79 Ga. 466, 7 S. E. 220, it was claimed by the mortgagor that a settlement closed up by absolute notes and mortgages was, by a contemporaneous oral agreement of the parties, to be revised by crediting all errors. Evidence to that effect was held inadmissible. The court said: "The defense, when analyzed, resolves itself into an effort to vary a written contract by parol, and to shun the consequences of gross neg to, that they should be varied by the result of subsequent examination, that agreement ought to have been embodied in the written contract, or in some other writing whereby to establish it. The omission to do either is decisive of this branch of the defense. There is no allegation in this agreement was intended to be embraced in the plea, and no indication in the evidence, that any writing, or that it was left out by fraud or mistake." In Kenney v. Aitken, 9 Daly (N. Y.) 500, the deed of trust involved was given to secure the payment of four specifically described notes. The maker of the trust deed brought an action upon an alleged contemporaneous parol agreement with the cestui que trust that the latter should repay to him the $400 represented by the last note, as the value of certain property covered by the trust deed which was exempt from execution. Van Brunt, J., said: "In the case of Cocks v. Barker, 49 N. Y. 107, it was held that the recital in the bond of a the consideration for the execution of the bond, fact, although the existence of that fact formed not like the consideration clause of a conveyance was a substantive part of the agreement, and or other instrument which might within certain limits be explained and varied by parol. The plaintiff in this action seeks to add to the deed that which is contained in the recitals." of trust another and different agreement from That case on principle cannot be distinguished from the one before us. See, also, Union National Bank v. International Bank, 22 Ill. App. 652; Falke v. Fassett, 4 Colo. App. 171, 34 Pac. 1005; Moffitt v. Maness, 102 N. C. 457, 9 S. E. 399; Bowery Bank of New York v. Hart, 77 App. Div. 121, 79 N. Y. Supp. 46; Knight v. Warren, 56 Hun, 642, 9 N. Y. Supp. 380; Cocks v. Barker, 49 N. Y. 107. [8, 9] While it is competent to prove by parol evidence that a deed absolute on its face was intended as a mortgage, or by an allegation of fraud or mistake to open the door to the fullest investigation as to the real intention of the parties to a written contract and thus defeat or reform it, the facts must be pleaded and the proof must be clear and convincing. These are well-recognized exceptions to the general rule excluding parol testimony. The first of these is sui generis, the second is not peculiar to mortgages, but applies to every kind of written contract. Neither is authority for the claim that an instrument purporting to be a mortgage complete upon its face and unambiguous as to the amount and character of the debt secured is any more subject to variation, extension, or contradiction by parol evidence than are other less formal contracts. To hold otherwise would render what commonly has been considered the surest security for a debt, the most precarious. [10, 11] When a mortgage is given to secure a sum of money, the receipt of which is acknowledged generally as in the usual consideration clause of a deed, parol evidence is and that he then elected to exercise the option to pay and carry these items, did not tend to change, add to, or vary either the mortgage or the consideration upon which it was based. In the case before us we are clear that the promise sued upon was improperly admitted. The judgment is reversed and the cause is remanded, with direction to dismiss. MORRIS, C. J., and CHADWICK, MOUNT, and FULLERTON, JJ., concur. cure future advances, and the actual amount The mortgage gave the mortgagee the option of such advances, or to otherwise explain of paying the taxes, assessments, and insurthe nature of the debt intended to be secured. ance premiums, and carrying the same under Babcock v. Lisk, 57 Ill. 327. So, also, where he mortgage at his election. Parol proof a mortgage is given to secure a specific note that at the time the mortgage was given, cerdescribed therein, parol evidence is admis-ain assessments and premiums were due, sible to prove the true consideration of the note and what debts the note is intended to evidence. Wilkerson v. Tillman, 66 Ala. 532. But the case here is neither of these. We have been cited to no authority and know of none holding that where a mortgage is given to secure a certain indebtedness specifically | oral evidence of the alleged contemporaneous described therein, the character and components of which are known and admitted, it is competent, without any allegation of fraud or mistake, to prove that by a contemporaneous parol agreement it was intended to se cure a debt of a wholly different origin and character or an additional sum to be advanced by the mortgagee as an additional consideration for the mortgage. Much less is it competent to prove that by such an oral agreement an additional sum was to be paid as an additional consideration without any intention that it should be secured by the mortgage. Such proof in either case would not be proving the consideration merely, but Where plaintiffs agreed with the defendants varying and enlarging the contract by add-to build certain foundations for a building and ing new terms and conditions and creating amount to which was added all extras for agreed further that they should be paid an new burdens. We said in Morris v. Healy changes ordered by the architect and from which Lumber Co., supra: was subtracted all amounts by which the changthat the decision of the architect should be cones decreased the cost of the building, agreeing clusive, but providing that in case of dispute as by the contractor the same should be arbitrated to the true value of any work added or omitted by appealing to the city superintendent of buildings, and further agreeing that in case any difference of opinion should arise in relation to the contract, the work to be performed under it or cision of the architect should be final and bindthe plans, drawings, and specifications, the deing, and stipulating for liquidated damages for delay in performance, there was no agreement for arbitration by the architect as to the value of extra work or as to demurrage, in the absence of which agreement the plaintiffs were entitled to resort to the courts. RUSSELL & GALLAGHER v. YESLER ES- (Supreme Court of Washington. Jan. 11, 1916.) TRATE-CONSTRUCTION. "Lastly it is contended that the court erred in excluding evidence as to the consideration that actuated the appellants in entering into the lease. But such evidence was immaterial to any issue made by the pleadings. While it is permissible for certain purposes to show by parol what the actual consideration was upon which a deed is founded, it is never permitted where the purpose of the evidence is to annex a condition to the instrument not expressed in it." There is no reason either in law or logic why the same rule should not apply to a mortgage complete in every particular on its face. It will not do to say that the alleged agreement was a separate and independent contract. Clearly the promise here sought [Ed. Note. For other cases, see Contracts, Cent. to be enforced, if independent of the mort-Dig. §§ 801-877, 879-883; Dec. Dig. 198.] gage, was without consideration, since the 2. CONTRACTS 198-SUBMISSION-MATTERS respondent on the same day agreed in writing not only with the Englands, but also with the appellant, on another consideration, to extend credit and permit the logging operations to continue. The alleged promise to pay the $1,000 could not have entered into that agreement in any view of the case, since the respondent does not claim to have known of it until long afterwards. We have gone into the matter thus fully for the reason that we are now satisfied SUBJECT TO ARBITRATION. Although the law favors the settlement of disputes by arbitration, it will compel parties to resort thereto only when the terms of their contract are clear and certain in showing that they had such intention. [Ed. Note.-For other cases, see Contracts, Cent. Dig. §§ 861-877, 879-883; Dec. Dig. 198.] Department 2. Appeal from Superior Court, King County; John E. Humphries, Judge. Action by Russell & Gallagher, copartners, against the Yesler Estate, Incorporated From a judgment for plaintiffs, defendant appeals. Affirmed. that in the case of Harbican v. Skinner, 83 Hughes, McMicken, Dovell & Ramsey, and R. J. Venables, all of Seattle, for appellant. Preston & Thorgrimson, of Seattle, for re For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes |