It is admitted that Bilgore Company signed the statement of indebtedness and agreement of creditors whereby it agreed to accept $10,390.25 of the Federal Land Bank as settlement of the Gunn indebtedness. Evidence of indebtedness was sent to the Federal Land Bank, when checks or vouchers were forwarded to Bilgore Company for the stipulated amount. Bilgore Company accepted and endorsed the vouchers, which contained words in capital letters thereon viz: "In Payment of Proceeds of Loan DF 52-13. Accepted in Full Settlement of the Following:" Pertinent language of the Creditors Agreement is namely: "The loan . . . may not be closed until the applicant for a loan from the bank . . . has obtained and sent to the bank a statement from each of his creditors, both secured and unsecured showing the information required by this form."
The answer of Bilgore Company admits the salient factssupra, but denies that the indebtedness due it by Gunn was cancelled because the loan on the part of the bank was for the accommodation of Gunn and that an oral agreement then existed between Bilgore *Page 804 Company and Gunn to the effect that Gunn would give his promissory note "for the difference," which note was to be executed by Gunn and delivered to Bilgore Company at a subsequent date. Four days after the Federal Loan was closed the note here involved was executed and delivered.
Sections 32, 33, 34, 48 Stat. 48, 49 as amended; 12 U.S.C. § 1016-1018 Sup. provides that loans will be approved only upon condition that the total indebtedness of the applicant be reduced to such an extent, if any, in order to insure the soundness of the loan. The parties here are charged with a knowledge of these several provisions. Parties or litigants have no legal right by their actions or conduct or by secret or oral agreements to circumvent and defeat the purpose and provisions of an Act of Congress designed to rehabilitate citizens engaged in agricultural pursuits who are in financial difficulties. It is appellant's contention that the secret oral agreement between Bilgore Company and Gunn about giving a note for the difference at a subsequent date should prevail over the plain mandates of an Act of Congress.
Was this secret agreement between the parties to keep the indebtedness alive ever brought to the attention of the Federal Land Bank? We find nothing in the record to support such a contention, but the antithesis thereof exists in that the Bank, prior to a commitment obtained the amount of Bilgore Company's claim against Gunn with an agreement that it would as full payment accept $10,390.25. Vouchers of the bank made payable to Bilgore Company contained language to the effect that they were issued in full payment of the debt. If Bilgore Company had informed the bank of the "secret oral agreement to *Page 805 keep the debt alive," would the bank have made the commitment? It is very unlikely. If Bilgore Company had apprised the bank of the "secret agreement" at any time prior to the issuance of the vouchers, would the loan have been closed? We hardly think so. The bank was charged with making said loans as outlined in the Act. It relied and acted on Bilgore Company's written consent of acceptance of the amount of $10,390.25. The Bank under the Act was charged with an obligation of rehabilitating farmers in financial distress. What assistance did Gunn receive by obtaining a loan from the bank and paying the same to Bilgore Company? The amount of his indebtedness was not reduced if the "secret oral agreement" of the parties is upheld. The "secret oral agreement" frustrated the governmental policy outlined by the Act which enabled persons in debt, and without ability to pay, to come within the beneficient purpose of the Act and make the bank the sole creditor and thereby eliminating by the Creditor's Agreement other creditors. Such "secret oral agreements" are contrary to public policy and fraudulent. See Kniefel v. Keller, 207 Minn. 109,290 N.W. 218; Jones v. McFarland, 178 Miss. 282, 173 So. 296; Federal Land Bank of St. Paul v. Koslofsky, 67 N.D. 322, 271, N.W. 907; Smeltzer v. McCrory, Tex. Civ. App., 101 S.W.2d 850.
The several contentions of the appellants have been carefully considered and the petition for rehearing is denied.
BROWN, C. J., TERRELL and THOMAS, JJ., concur. *Page 806