Opinion
37228.
DECIDED SEPTEMBER 16, 1958.
Foreclosure; affidavit of illegality. Bulloch Superior Court. Before Judge Renfroe. April 19, 1958.
Cohen Anderson, for plaintiff in error.
Ralph V. Bacon, Wm. J. Neville, Neville Neville, contra.
1. The fact that the papers possess many features of consignment contracts, did not transform them into agreements of that nature, since they evinced absolute promises to pay the purchase price of the articles described.
2. It is not permissible to plead that a valid written promise to pay is varied or contradicted by parol agreements contemporaneous or prior to the execution of the instrument evincing such promise to pay.
3. It is permissible to plead that the parties to a written contract have subsequently to its execution by explicit agreement and course of dealings changed some of its terms, provided the contract when thus altered is complete and legal.
4. Ordinarily, where a retention-of-title contract is foreclosed against property, that the employee who signed the contract in the partnership name was not authorized to execute an instrument of that nature on behalf of the partnership, set up a valid defense to the foreclosure.
DECIDED SEPTEMBER 16, 1958.
Long Tobacco Harvesting Company, Inc., filed a petition in Bulloch Superior Court against H. L. Brannen and C. I. Dekle, d/b/a Coastal Irrigation Company, wherein it sought to foreclose twenty-six retention-of-title purchase-money contracts. The contracts are identical except the stipulations as to the due date, amount payable, and the description of the property is different in each contract. The form and general substance of the contracts are exemplified by the first of their number which reads:
Long Tobacco Harvesting Company, Inc. Taraboro, North Carolina
"No. 5226 $55.60. Statesboro, Georgia. June 4, 1956. (City) (State) (Date) On or before the 1st day of July 1956, for value received, the undersigned dealer promises to pay to the order of the sum of Fifty-five 60/100 -------------------------- Dollars At Security National Bank Taraboro, N.C. (Name of Dealers Bank) (City State) This note is given for purchase price of following personal property: Shipped under One Long's Invoice No. Date Serial No. Engine No. 2-Room 8011 June 4, 1956 Rack If paid in cash on or plus additional discount of 1/2 of 1% per month computed on subject to $ _____ discount / before — $55.60 from date of payment in cash to maturity date. The undersigned dealer specifically agrees and binds himself: (1) Not to lend, rent, mortgage, pledge, encumber, or use the above described personal property, or in any way dispose of or lose possession of the same except as hereinafter provided: (2) That the above described personal property shall be and remain the property of Long Tobacco Harvesting Company, Inc., its assignee or endorsee, the title to the same being expressly retained in the seller until this note is paid in cash as hereinafter provided; (3) That so long as this note remains unpaid the dealer will sell said personal property only for cash and for not less than the amount set forth as the balance of the unpaid purchase price in respect to such personal property; (4) That immediately upon the sale of any item of personal property above set forth, the undersigned dealer shall deliver proceeds thereof, or so much of the same as may be required to pay the balance of the purchase price, to the said Long Tobacco Harvesting Company, Inc., its assignee or endorsee, and until delivery is actually made to hold the full amount of such proceeds in trust for said Long Tobacco Harvesting Company, Inc., its assignee or endorsee, separate from any and all other funds belonging to the undersigned; (5) That if any item of said personal property is delivered by the undersigned or is removed from the undersigned's place of business, or if settlement is made by the undersigned with the purchaser of said personal property, and if, immediately upon such event, the said purchase price of said personal property is not immediately paid in cash to the holder of this note, or if the undersigned shall cease to do business, or make an assignment, or commit an act of bankruptcy, then this note shall immediately become due and the Long Tobacco Harvesting Company, Inc., its assignee or endorsee shall be entitled to take immediate possession of said personal property, or the trust fund representing the purchase price, if said personal property has been sold; (6) That the undersigned shall pay interest on this note at the rate of six percent per annum after date of maturity; (7) That in the event of action for foreclosure, repossession, or recovery of trust funds hereunder, the undersigned agrees to pay all cost and fees, including attorney's fees of ten percent of the amount recovered or the value of the personal property recovered; (8) All parties to this note, whether sureties, endorsers or guarantors, hereby waive protest, presentation and notice of dishonor and agree that any extension of time for the payment of this note shall not affect the liability of such parties and notice of such extension is waived. Witness our hands and seals as of the date above written. Coastal Irrigation Co. By: /s/ H. L. Brannen (Seal) (Seal) (Seal) Witness: Mrs. G. K. Johnston, Jr." The Clerk of Bulloch Superior Court issued an execution in the usual form which was levied upon a portion of the property described in the retention-of-title contracts. The defendants filed an affidavit of illegality reading: "Georgia, Bulloch County. Before me, Joyce C. Johnston, of said county, an officer of said State, authorized by law to administer oaths, personally appeared H. L. Brannen, one of the defendants in the above stated cause, who, on oath says that the above described fi. fa. heretofore levied upon property of deponent, is proceeding illegally, for the following reasons, to wit:"That the said property levied upon by the sheriff of said county, as aforesaid, is not the property of deponent, H. L. Brannen, nor of C. I. Dekle, nor of said deponent, operating as the Coastal Irrigation Company, and that the plaintiff in fi. fa. has had a levy made on property which belongs to the said plaintiff, Long Tobacco Harvesting Company, Inc.; and because there is no leviable interest in said property existing in the said plaintiff in fi. fa.; and because there is no legal nor equitable reason for the existence of said levy upon said property.
"That the title to said described property has never, at any time, been in defendants in fi. fa. for the reason that each and every item of said property described in said levy was and has been delivered to the defendants in fi. fa. on consignment; and has remained in the hands and possession of defendants in fi. fa. at all times incident to the transaction, on consignment, to be accounted for to the plaintiff in fi. fa., when and only, upon the sale and disposal of said property by the defendants in fi. fa.; and that the defendants in fi. fa. stand ready and willing to deliver each and every item of said property to the plaintiff in fi. fa., as the property of plaintiff in fi. fa.
"Deponent, H. L. Brannen, for himself and for C. I. Dekle, partners, doing business as Coastal Irrigation Company, deposes and says that neither of them nor said Coastal Irrigation Company, is indebted to the plaintiff in fi. fa. in any amount, and that the bills of sale foreclosed are utterly void and without consideration for the reason that said bills of sale are nothing more than memorandums for the receipt of the property described in the fi. fa. levied upon said property; and that said property, as aforesaid, is not the property of the defendants in fi. fa., and was in the possession, custody and control of the defendants in fi. fa. as the property of the plaintiff in fi. fa. and has, at all times, been so held for said plaintiff in fi. fa.
"That the plaintiff in fi. fa. has never demanded of the defendants in fi. fa. the delivery of said property claimed in said bills of sale; and that the defendants in fi. fa. have stood ready and willing, at all times, to make delivery of said property to the plaintiff in fi. fa., all pursuant to the consignment of said property to the defendants in fi. fa., for the purpose of sale and remittance to the plaintiff in fi. fa. when and if said property should be sold by said defendants in fi. fa."
The trial judge sustained a general demurrer to the affidavit of illegality, whereupon the defendants amended the same by alleging: "That the notes, alleged by the plaintiff in fi. fa. to be purchase money notes, are not in fact purchase money notes; and the terms stated in said notes are repugnant to the contentions of the plaintiff in fi. fa. that they are retain title purchase money notes; and attention is specifically directed to items 1, 2, 3, 4, and 5 which, in their substance and terms, are consistent with the contentions of defendant in fi. fa. that the various items of property described in all of said alleged notes attached to plaintiff's pleadings in foreclosure were delivered to the defendants in fi. fa. on consignment; and that said items have been and are now held by the defendants in fi. fa. as the property of the plaintiff in fi. fa.; and that the contentions of the defendants in fi. fa. are not inconsistent with the reservation of title in said notes, to the effect that the title to said property is in the plaintiff in fi. fa. and that said property has been held as the property of the plaintiff in fi. fa. and not as the property of defendants in fi. fa. That the alleged title retaining purchase money represent nothing more than memorandums of delivery of the items therein specified. That notes numbers 5551, 5299, 5291, 5292, 5293, 5300, 5294, 5295, 5296, 5297, and 5298, were not executed and made by the Coastal Irrigation Company, the same being the trade name of defendants in fi. fa., but were signed, executed and delivered by one Thomas Waters, an employee of the Coastal Irrigation Company, and who had no authority, neither directly nor indirectly to sign such notes and to bind the defendants in fi. fa. thereby; and that the effect of his signature on said notes or memorandums amounted to nothing more than signing and making a memorandum to plaintiff in fi. fa. for the delivery of the goods therein described; and, likewise, the remainder of said notes attached to plaintiff's petition and which were signed by H. L. Brannen, one of the defendants in fi. fa., are also nothing more than memorandums of the delivery to the Coastal Irrigation Company of the items named in said notes; and that no official witness appears on any of the notes proceeded upon by the plaintiff in fi. fa.; and none have been recorded; and all of which conditions are contrary to the manner and form which should be exercised in the making and delivery of the type of notes which the plaintiff in fi. fa. claims the notes proceeded upon to be.
"That the course of conduct of the plaintiff in fi. fa. engaged in by the plaintiff in fi. fa., was and has been such as to ratify and acknowledge that the property described in the said notes was and is the property, and has been at all times, of the plaintiff in fi. fa. That one Mason Smith, an agent and employee of the plaintiff in fi. fa., represented the plaintiff in fi. fa., in the transaction involving the property specified in said notes, in that he made periodical visits to the place of business of defendants in fi. fa., over a period of time from the inception of said transaction until the time of foreclosure on said notes, said dates appearing in the pleadings of the plaintiff in fi. fa., took inventories of the property, and, from time to time during said period, appeared at the place of business of the defendants in fi. fa., and removed and personally supervised removal of various and sundry parts of said property and machinery from the premises of the defendants in fi. fa., as the property of plaintiff in fi. fa., and, at the time, asserting the rights of plaintiff in fi. fa., to take over said property and to remove the same because said property was the property of the plaintiff in fi. fa., and not the property of the defendants in fi. fa.; and that the defendants in fi. fa. exercised no control over said property, insofar as interfering with the free and unrestricted actions of said Mason Smith in controlling, claiming and removing said property from the place of business of defendants in fi. fa., and that the plaintiff in fi. fa. never, at any time, contended that the property was not in the possession of defendants in fi. fa. on consignment.
"A statement showing the items taken and removed from the machines in question by Mason Smith, agent of the plaintiff in fi. fa., as aforesaid, is hereto attached, marked Exhibit `A' and thereby is made a part of this amendment."
To the amended affidavit the plaintiff demurred generally. The trial judge overruled the demurrer, and the plaintiff excepted.
1. The exception is to a judgment of the trial judge overruling a general demurrer to the affidavit of illegality in its final form. It follows that, if that pleading set out any valid defense to the foreclosure of the retention-of-title contracts, the judgment must be affirmed.
The affidavit of illegality undertook to present a variety of defenses. The first was that the papers foreclosed were not retention-of-title contracts but were consignment contracts. The fact that the papers possess many features of consignment contracts did not transform them into agreements of that nature, since they evinced absolute promise to pay the purchase price of the articles they described. McKenzie v. Roper Wholesale Grocery Co., 9 Ga. App. 185 ( 70 S.E. 981).
2. The affidavit of illegality alleged that prior to the execution of retention-of-title contracts the plaintiff and the defendants agreed that the articles described in the instruments were to be delivered to the defendants on a consignment basis, and that the contracts did not represent the true agreement of the parties. The allegation does not constitute a defense.
The affidavit of illegality sought to set up a similar defense, that it was not the intention of the plaintiff and the defendants that the retention-of-title contracts commit the defendants to absolute promise to pay for the articles described in them, but were intended only as receipts for the articles. Code § 38-501; Indiana Truck Corp. v. Glock, 46 Ga. App. 519 ( 168 S.E. 124); Hill v. Sterchi Bros. Stores, 50 Ga. App. 193 (2) ( 177 S.E. 353). That which cannot be proved cannot be pleaded.
It is not permissible to plead that a valid written promise to pay is varied or contradicted by parol agreements contemporaneous or prior to the execution of the instrument evincing such promise to pay. Red Line Products Co. v. J. M. High Co., 57 Ga. App. 304, 315 ( 195 S.E. 296). Hence the defense pleaded was not a valid one.
3. The affidavit of illegality undertook to interpose the defense that the plaintiff and defendants had by a course of dealings substituted for the original contract contained in the retention of contract of assignment by the terms of which the articles were not sold to the defendants, but were merely delivered to them on consignment basis, that is, the purchase price was to be paid by the defendants only in the event the defendants sold the articles to third parties. In Wimberly v. Tanner, 34 Ga. App. 313 (1) ( 129 S.E. 306) it is held: "The rule that contemporaneous evidence is generally inadmissible to contradict or vary the terms of a valid written instrument (Civil Code of 1910, § 5788) is not violated by proof of a new and distinct subsequent agreement in the nature of a novation. Civil Code (1910), § 5794. But the novation, to be valid, must be supported by some new consideration. Civil Code (1910) § 4226; Collier Estate v. Murray, 145 Ga. 851 (1) ( 90 S.E. 52)."
There is no question that through a course of dealing an entirely new verbal contract may be substituted for a valid written contract, and mutual acquiescence in such course of dealing may constitute sufficient consideration for the new contract. Hill v. Sterchi Bros. Stores, 50 Ga. App. 193, supra.
The alleged substitution did not extend to a change of all of the provisions of the agreement contained in the retention-of-title contract, but only to the clause of the contract that committed the defendants to an absolute promise to pay the purchase price of the articles described in the retention-of-title contracts. Analysis of the retention-of-title contracts reveals that they contained both absolute and conditional promises to pay the purchase price of the articles, which were not, in the form the instruments were drawn, at all inconsistent. The change in the obligations of the retention-of-title contracts allegedly made by the course of dealings in reference to handling of the articles simply served to relieve the defendants of the absolute promise to pay for the described articles, and allow the conditional promise to pay for the same of force.
This alleged change, if in fact made by the dealings of the parties, had the effect to transform the agreement from conditional-sale contracts to contracts of consignment.
In Morrison v. Roberts, 195 Ga. 45, 46 ( 23 S.E.2d 164) the rule is stated: "While it is true, as recognized by the Code, § 20-116, that where parties, in the course of the performance of a contract, depart from its terms and pay or receive money under such departure, a modification by way of a quasi new agreement will be implied, still, in order for this rule to have application, it is necessary that the circumstances be such as will in law imply a mutual new agreement, so that the modification, when taken in connection with the original contract, will provide a new and distinct agreement complete in its terms. Bearden Mercantile Co. v. Madison Oil Co., 128 Ga. 695 (4), 703 ( 58 S.E. 200); Southern Feed Stores v. Sanders, 193 Ga. 884 (3), 887 ( 20 S.E. 413); Kennesaw Guano Co. v. Miles, 132 Ga. 763, 770 ( 64 S.E. 1087), and cit.; Ball v. Foundation Co., 25 Ga. App. 126 ( 103 S.E. 422); Jones v. Lawman, 56 Ga. App. 764, 771 ( 194 S.E. 416)." Many supporting authorities are cited in the Morrison case.
The retention-of-title contracts in this case, with the provision providing absolute promises deleted contain a definite and complete contract of consignment. Hence, since the only alleged change made by the dealings of the parties was to delete from the contracts the clause committing the defendants to absolute promise to pay, the affidavit of illegality seems to meet the rule that where it is alleged that there has been a novation, either expressed or arising out of the dealings of the parties, the pleading must show that the agreement of the parties altered by the novation expressed a distinct and complete new contract.
4. The affidavit of illegality set up a valid defense, the defense that part of the retention-of-title contracts sought to be foreclosed were signed by an employee of the defendants who was not authorized to execute the instruments on behalf of the defendants. This defense was pleaded imperfectly, but under the ruling in East Point Lumber Co. v. Chandler, 46 Ga. App. 361 (1), ( 167 S.E. 787) was sufficient to withstand a general demurrer.
Judgment affirmed. Felton, C. J., and Nichols, J., concur.