Kilday v. Baskette

Court of Appeals of Tennessee
36 Tenn. App. 479, 1953 Tenn. App. LEXIS 136, 259 S.W.2d 162 (1953)

ELI5:

Rule of Law:

Parol evidence is admissible to vary or contradict a written instrument when the oral agreement served as the inducement for executing the writing, or when the party against whom enforcement is sought admits under oath that the writing does not constitute the complete agreement.

Facts:

The defendant auctioned a farm with terms allowing the purchaser to pay either one-third cash with the balance over two years or the entire amount in cash.
Kilday purchased the farm for $21,700 and met with the defendant to close the transaction.
Kilday initially refused to sign the deferred payment notes, preferring to obtain a cheaper bank loan and pay the full cash price immediately.
The defendant stated he was too busy with his crops to wait for a cash payment and needed to close the deal immediately.
To persuade Kilday to sign, the defendant verbally promised that he would accept payment of the notes at any time with accrued interest.
Relying on this verbal assurance, Kilday executed the notes and the deed of trust instead of paying cash.
Months later, Kilday attempted to pay off the full balance of the notes.
The defendant refused to accept the early payment, claiming the written notes controlled and denied the existence of the binding oral agreement.

Procedural Posture:

Kilday filed a bill in the Chancery Court seeking cancellation of the notes and deed of trust upon tender of payment.
The Chancellor admitted parol evidence regarding the verbal agreement to allow prepayment.
The Chancellor entered a decree in favor of Kilday, ordering the cancellation of the notes.
The defendant appealed the decision to the Court of Appeals of Tennessee.

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Issue:

Is parol evidence admissible to prove a verbal agreement allowing the prepayment of promissory notes where the maker claims the oral promise induced him to sign the notes and the payee admits under oath that the written notes did not reflect the entire agreement?

Opinions:

Majority - Judge McAmis

Yes, parol evidence is admissible to prove the oral agreement because the defendant's own testimony confirmed the writing was incomplete. The court reasoned that while the 'inducement' exception to the parol evidence rule (citing Haynes v. Morton) likely applied, the case was definitively resolved by the defendant's judicial admission. In his deposition, the defendant admitted he agreed to accept payment without interest if made within a few days. By admitting under oath that the written notes did not express the entire agreement, the defendant acknowledged the contract was partly in writing and partly in parol. Consequently, it would be inequitable to allow the defendant to invoke the parol evidence rule to suppress the plaintiff's evidence regarding the specific terms of that oral agreement.

Analysis:

This decision reinforces the equitable limitations of the parol evidence rule in Tennessee, specifically preventing the rule from being used as a shield for fraud. By elevating a 'judicial admission' (an admission under oath) above the strict application of the parol evidence rule, the court ensures that a party cannot rely on the sanctity of a written contract while simultaneously admitting in court that the writing is incomplete. The case establishes that once a party admits a contract is not fully integrated (i.e., partly oral), they open the door for the opposing party to introduce evidence proving the specific terms of the oral portion.

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