George Rose Smith, Justice.
In 1956 the appellants, Thomas Newton Belew and his wife, sold a small, poorly constructed dwelling house to the appellee, Madie Griffis, for a recited consideration of $5,250.00, which the chancellor found to represent both the principal and the interest at 8% per annum. Mrs. Griffis made a down payment of $35.00 and executed a promissory note for the balance of $5,215.00, payable in monthly installments of $35.00 each. Mrs. Griffis also received a warranty deed in which the grantors recited the contractual terms and retained a vendor’s lien to secure the unpaid purchase price.
Mrs. Griffis faithfully made the monthly payments for 12 years and 8 months, those 152 payments totaling $5,220.00, or $105.00 more than the original debt. Mrs. Griffis then discontinued her payments, in the belief that the note had been fully paid. Some five months after the Belews received the last of the 152 payments they brought this suit to enforce the note and vendor’s lien. It is their contention that the face amount of the note, $5,215.00, represented only the principal of the debt, which bore interest at 8%. In that view Mrs. Griffis had managed to reduce the principal debt by only $61.73 in the course of 12 years and 8 months. The complaint accordingly sought judgment for a balance of $5,153.27 and foreclosure of the vendor’s lien.
In answer to the complaint Mrs. Griffis pleaded fraud, in that the sellers had led her to believe that the sum of $5,250.00 was the total amount due, upon the payment of which “her home would be free and clear to her.” After a trial the chancellor sustained Mrs. Griffis’s position and entered a decree canceling the vendor’s lien and dismissing the complaint. For reversal the Belews contend that the decree is contrary to the evidence and that the chancellor erred in admitting certain testimony.
At the outset we recognize the rule that where, as here, a charge of fraud involves the contradiction of a written instrument by oral testimony, the party asserting such fraud must prove his case by clear and convincing testimony. Clay v. Brand, 236 Ark. 236, 365 S. W. 2d 256 (1963). After studying the record we have no doubt that the appellee fully sustained her heavy burden of proof.
At the time of the trial Belew was 92 years old; his wife was 85. Both testified, with clarity. Mrs. Belew said that she had typed out the note and deed, following forms that had been prepared by an attorney in an earlier transaction. Both Mr. and Mrs. Belew denied having told Mrs. Griffis that the face amount of the note included both principal and interest. Significantly, however, neither Mr. Belew nor Mrs. Belew indicated in any way whatever by their testimony that their understanding of the transaction had been explained to Mrs. Griffis when the documents were signed. Hence the Belews’ case rests almost entirely upon the bare language of the note and warranty deed.
Mrs. Griffis testified that when the instruments were signed Mr. Belew pointed to the figure $5,250.00 and said, “This is how much you will pay. I want you to understand your interest is figured in. When you get this amount paid, your house will be paid. It will take you around twelve years to pay for it; then you and the boys [Mrs. Griffis was then a widow with four sons] will have your home.” Mrs. Griffis also stated that she did not read the note before signing it; “I didn’t think there was any need. I thought everybody should be honest like myself, and I just had a feeling he was just an honest old man.”
Counsel for the Belews objected to Mrs. Griffis’s testimony, as being in violation of the parol evidence rule. Where fraud is alleged, however, such testimony is competent. Although a person is ordinarily bound to know the contents of a contract which he signs, we have often recognized an exception to that principle when fraud or inequitable conduct is charged. As we said in Massachusetts Mut. Life Ins. Co. v. Brun, 187 Ark. 790, 62 S. W. 2d 961 (1933):. “There is a well-recognized exception to the rule that a party is bound to know the contents of a paper which he signs; and that is where one party procures another to sign a writing by fraudulently representing that it contains the stipulation agreed upon, when, in fact, it does not, and where the party signing relies on the faith of these representations, and is thereby induced to omit the reading of the writing which he signs. It is well settled that a written contract which one party induced another to execute by false representations as to its contents is not enforceable, and the party so defrauded is not precluded from contesting the validity of the contract by the fact that he failed to read it before attaching his signature.” Other cases to the same effect include Dodson v. Abercrombie, 212 Ark. 918, 208 S. W. 2d 453 (1948); Galloway v. Russ, 175 Ark. 659, 300 S. W. 390 (1927); and J. I. Case Threshing Machine Co. v. Southwestern Veneer Co., 135 Ark. 607, 205 S. W. 978 (1918).
Ordinarily, it is true, the Belews’ statement that the recited consideration included both principal and interest would not be admitted to contradict the contract, but we have noted an exception to that rule: “[W]hen one who has had superior means of information professes a knowledge of the law, and thereby obtains an unconscionable advantage of another, who is ignorant, and has not been in a situation to become informed, the injured party is entitled to relief as well as if the misrepresentation had been concerning matters of fact.” Cornish v. Johns, 74 Ark. 231, 85 S. W. 764 (1905).
Here there is no doubt either that the Belews were in a superior position to know the legal effect of the contract, which they prepared, or that they obtained an unconscionable advantage over Mrs. Griffis. Those two points must be examined with care.
First, the Belews were in a superior position to know the legal effect of the note and deed. Not only had they prepared the instruments in the light of at least one previous transaction of the same kind, but also the instruments themselves were by no means readily understandable to a person not skilled in the interpretation of legal language. Neither the note nor the deed sets out the number of payments that would be required if the recited consideration comprises the principal only. In fact, the deed, which is the only document of which Mrs. Griffis received a copy, contains this extremely ambiguous provision: “Interest payable monthly, and principle and interest payable in monthly installments of Thirty-five Dollars ($35.00) each, the first installment to be paid on or before July 6, 1956, and all other installments to be paid on or before the 6th day of each month thereafter until said note and all interest thereon shall have been paid in full.” It will be seen that the foregoing sentence can easily be taken to mean that the $5,215.00 total includes both principal and interest.
Secondly, the contract, literally construed, is perhaps more unconscionable than any other agreement considered by this court in the past hundred years or more. The original recited consideration was $5,250.00. At 8% the annual interest comes to $420.00, which is exactly $35.00 a month. Hence, had there been no down payment Mrs. Griffis might have paid $35.00 a month forever without reducing the principal debt by a penny.
There was, however, a down payment of $35.00, reducing the original debt to $5,215.00.
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George Rose Smith, Justice.
In 1956 the appellants, Thomas Newton Belew and his wife, sold a small, poorly constructed dwelling house to the appellee, Madie Griffis, for a recited consideration of $5,250.00, which the chancellor found to represent both the principal and the interest at 8% per annum. Mrs. Griffis made a down payment of $35.00 and executed a promissory note for the balance of $5,215.00, payable in monthly installments of $35.00 each. Mrs. Griffis also received a warranty deed in which the grantors recited the contractual terms and retained a vendor’s lien to secure the unpaid purchase price.
Mrs. Griffis faithfully made the monthly payments for 12 years and 8 months, those 152 payments totaling $5,220.00, or $105.00 more than the original debt. Mrs. Griffis then discontinued her payments, in the belief that the note had been fully paid. Some five months after the Belews received the last of the 152 payments they brought this suit to enforce the note and vendor’s lien. It is their contention that the face amount of the note, $5,215.00, represented only the principal of the debt, which bore interest at 8%. In that view Mrs. Griffis had managed to reduce the principal debt by only $61.73 in the course of 12 years and 8 months. The complaint accordingly sought judgment for a balance of $5,153.27 and foreclosure of the vendor’s lien.
In answer to the complaint Mrs. Griffis pleaded fraud, in that the sellers had led her to believe that the sum of $5,250.00 was the total amount due, upon the payment of which “her home would be free and clear to her.” After a trial the chancellor sustained Mrs. Griffis’s position and entered a decree canceling the vendor’s lien and dismissing the complaint. For reversal the Belews contend that the decree is contrary to the evidence and that the chancellor erred in admitting certain testimony.
At the outset we recognize the rule that where, as here, a charge of fraud involves the contradiction of a written instrument by oral testimony, the party asserting such fraud must prove his case by clear and convincing testimony. Clay v. Brand, 236 Ark. 236, 365 S. W. 2d 256 (1963). After studying the record we have no doubt that the appellee fully sustained her heavy burden of proof.
At the time of the trial Belew was 92 years old; his wife was 85. Both testified, with clarity. Mrs. Belew said that she had typed out the note and deed, following forms that had been prepared by an attorney in an earlier transaction. Both Mr. and Mrs. Belew denied having told Mrs. Griffis that the face amount of the note included both principal and interest. Significantly, however, neither Mr. Belew nor Mrs. Belew indicated in any way whatever by their testimony that their understanding of the transaction had been explained to Mrs. Griffis when the documents were signed. Hence the Belews’ case rests almost entirely upon the bare language of the note and warranty deed.
Mrs. Griffis testified that when the instruments were signed Mr. Belew pointed to the figure $5,250.00 and said, “This is how much you will pay. I want you to understand your interest is figured in. When you get this amount paid, your house will be paid. It will take you around twelve years to pay for it; then you and the boys [Mrs. Griffis was then a widow with four sons] will have your home.” Mrs. Griffis also stated that she did not read the note before signing it; “I didn’t think there was any need. I thought everybody should be honest like myself, and I just had a feeling he was just an honest old man.”
Counsel for the Belews objected to Mrs. Griffis’s testimony, as being in violation of the parol evidence rule. Where fraud is alleged, however, such testimony is competent. Although a person is ordinarily bound to know the contents of a contract which he signs, we have often recognized an exception to that principle when fraud or inequitable conduct is charged. As we said in Massachusetts Mut. Life Ins. Co. v. Brun, 187 Ark. 790, 62 S. W. 2d 961 (1933):. “There is a well-recognized exception to the rule that a party is bound to know the contents of a paper which he signs; and that is where one party procures another to sign a writing by fraudulently representing that it contains the stipulation agreed upon, when, in fact, it does not, and where the party signing relies on the faith of these representations, and is thereby induced to omit the reading of the writing which he signs. It is well settled that a written contract which one party induced another to execute by false representations as to its contents is not enforceable, and the party so defrauded is not precluded from contesting the validity of the contract by the fact that he failed to read it before attaching his signature.” Other cases to the same effect include Dodson v. Abercrombie, 212 Ark. 918, 208 S. W. 2d 453 (1948); Galloway v. Russ, 175 Ark. 659, 300 S. W. 390 (1927); and J. I. Case Threshing Machine Co. v. Southwestern Veneer Co., 135 Ark. 607, 205 S. W. 978 (1918).
Ordinarily, it is true, the Belews’ statement that the recited consideration included both principal and interest would not be admitted to contradict the contract, but we have noted an exception to that rule: “[W]hen one who has had superior means of information professes a knowledge of the law, and thereby obtains an unconscionable advantage of another, who is ignorant, and has not been in a situation to become informed, the injured party is entitled to relief as well as if the misrepresentation had been concerning matters of fact.” Cornish v. Johns, 74 Ark. 231, 85 S. W. 764 (1905).
Here there is no doubt either that the Belews were in a superior position to know the legal effect of the contract, which they prepared, or that they obtained an unconscionable advantage over Mrs. Griffis. Those two points must be examined with care.
First, the Belews were in a superior position to know the legal effect of the note and deed. Not only had they prepared the instruments in the light of at least one previous transaction of the same kind, but also the instruments themselves were by no means readily understandable to a person not skilled in the interpretation of legal language. Neither the note nor the deed sets out the number of payments that would be required if the recited consideration comprises the principal only. In fact, the deed, which is the only document of which Mrs. Griffis received a copy, contains this extremely ambiguous provision: “Interest payable monthly, and principle and interest payable in monthly installments of Thirty-five Dollars ($35.00) each, the first installment to be paid on or before July 6, 1956, and all other installments to be paid on or before the 6th day of each month thereafter until said note and all interest thereon shall have been paid in full.” It will be seen that the foregoing sentence can easily be taken to mean that the $5,215.00 total includes both principal and interest.
Secondly, the contract, literally construed, is perhaps more unconscionable than any other agreement considered by this court in the past hundred years or more. The original recited consideration was $5,250.00. At 8% the annual interest comes to $420.00, which is exactly $35.00 a month. Hence, had there been no down payment Mrs. Griffis might have paid $35.00 a month forever without reducing the principal debt by a penny.
There was, however, a down payment of $35.00, reducing the original debt to $5,215.00. Counsel for the plaintiffs attached to the complaint a computation showing that after Mrs. Griffis had made payments for more than twelve years she still owed $5,153.27. After the case was submitted to us we had an independent computation made which confirms the accuracy of the plaintiffs’ figures. (According to our computation the debt would have been $5,153.37 — a difference of only ten cents.)
When the same computation is carried forward until the debt is finally paid, it is found that 62 years and 9 months would be required to retire the note: a total of 753 monthly payments. Mrs. Griffis was 41 years old when she bought the house, with a life expectancy of 30 years. Ark. Stat. Ann. § 50-705 (Supp. 1969). At the expiration of those 30 years her 360 monthly payments would have reduced the principal by $361.63, leaving a balance of $4,863.37. If, however, Mrs. Griffis lived to be a hundred years old she would have the satisfaction of knowing that the obligation was down to $1,343.39, which would be completely paid in a little less than four more years.
As we have said, the note itself did not state the number of payments needed to retire the obligation if the note were considered to embody the principal debt only. That computation requires 753 monthly calculations, involving many hours of labor. It goes without saying that Mrs. Griffis could not possibly have had any idea of such an appalling future when she signed the note. In fact, we really do not believe that the Belews themselves ever made any such computation, for we are convinced by the proof that they intended for the note to include the interest and that they truthfully so stated when the transaction was entered into.
There are many circumstances pointing to that conclusion. To begin with, it is not reasonable to suppose that Mrs. Griffis obligated herself in a matter of such gravity without making any inquiry about the expected duration of her monthly payments. We know to a moral certainty that she was not told that the payments would continue for more than sixty years. Consequently the only reasonable alternative is to accept as true her testimony that the Belews represented the sum of $5,250.00 to be the entire consideration, principal and interest. No third possibility is suggested by the proof.
Next, according to the only evidence about the value of the house, $5,250.00 would have been an excessive price for the property. Dorsey McRae, an expert in real property values, testified without contradiction that in 1956 the house and lot were worth about $3,340.00. Our computation shows that if the original debt had been $3,305.00 (McRae’s estimate less the down payment) and the monthly payments had been $35.00, applied first to accrued interest and then to the principal, the debt would have been retired in 149 months. That is exactly the number of monthly payments that were due under the contract as it was represented to be. Hence it is clear that the parties entered into an equitable contract, based upon the property’s fair market value, rather than into an agreement so unconscionable as to have no parallel in our Reports.
Finally, the Belews are shown to have sold two other houses in the same neighborhood with similar notes and lien-retaining deeds. Those deeds are in evidence and are drawn in the same way as that received by Mrs. Griffis. One of the deeds was to Louise Jones and recited a consideration of $5,000.00, payable in monthly installments of $35.00, with interest at 8% annually. At that rate it would have taken Mrs. Jones 38 years and 2 months to pay off the debt, but she testified that the Belews told her that the $5,000 figure included both interest and principal. The other purchasers, Mr. and Mrs. McKamie, both testified that they had been told the same thing by the Belews with respect to a $4,000.00 purchase that would have taken 18 years and 1 month for retirement under the appellants’ theory.
The testimony of Mrs. Jones and of the McKamis was objected to, but proof of such similar transactions is admissible to show the parties’ intentions. We stated the rule in Myers v. Martin, 168 Ark. 1028, 272 S. W. 856 (1925): “The general rule is that testimony must be confined to the particular transaction under investigation, and that evidence of other conduct, statements or transactions is inadmissible. There are, however, exceptions to this rule, and they have been recognized in decisions of this court, both civil and criminal. [Citing cases.] Those exceptions relate to proof of motive and design or intention. Decisions of other courts cited in brief of counsel are to the same effect.” In a later case, Schwarzlose v. Kingrey, 231 Ark. 537, 330 S. W. 2d 947 (1960), we upheld the admissibility of testimony about negotiations for similar contracts as tending to prove the terms of the contract actually in issue.
In sum, the record abounds with established facts supporting the appellee’s contentions and the chancellor’s decree. In fact, except for the naked language of the note and lien-retaining deed, there is hardly any persuasive evidence to the contrary. We have not the slightest hesitancy in holding that the appellee’s proof satisfies the requirement that it be clear and convincing.
Affirmed.
Brown, J., not participating. Jones and Byrd, JJ., dissent.