## Facts

- Earl and Billie Walker operated a dairy farm and were solicited by Daniel R. Partin to obtain a mechanical water softener for herd drinking water.
- Partin represented the device would increase milk production and could be paid for from the increase.
- The parties orally agreed the softener would be installed on a trial basis and the Walkers would be obligated to buy only if milk production actually increased; otherwise Partin would remove it and the Walkers would owe nothing.
- At or near the time of the oral arrangement, the Walkers signed an “All Goods Retail Installment Contract” stating a purchase price plus finance charge, payable in monthly installments, with title retained by the seller until paid and default remedies stated.
- Partin also orally stated the contract would not be assigned, but he assigned it to Associates Loan Company.
- The softener did not increase milk production; the Walkers made no payments.
- Partin and a successor made some payments to Associates, but the Walkers did not.

## Issues

1. Whether parol evidence is admissible to prove an oral condition precedent that the written installment contract would not become effective unless milk production increased.
2. Whether an assignee of the installment contract takes subject to that condition precedent and the defenses the Walkers could assert against the assignor.

## Decision

- The Supreme Court of New Mexico affirmed judgment for the Walkers.
- The court held that evidence of an oral condition precedent to the effectiveness of a written contract is admissible and not barred by the parol evidence rule when offered to show the contract never became operative.
- The court held Associates, as assignee, acquired no greater rights than Partin and took subject to the condition precedent and available defenses.
- Because the condition (increased milk production) did not occur, the Walkers’ obligation under the written contract never became enforceable.

## Legal Principles

- Parol evidence is not excluded when used to show a written instrument was subject to a condition precedent and therefore did not become a binding contract absent the condition’s occurrence.
- A condition precedent may be proved by oral agreement when it concerns whether a written contract takes effect, rather than altering the contract’s stated terms.
- An assignee of a contractual right generally takes only what the assignor had and remains subject to defenses and claims the obligor could assert against the assignor.
- Under U.C.C. Article 9 (as adopted in New Mexico at the time), an assignee’s rights are subject to the contract’s terms and to defenses or claims arising from the transaction that the account debtor could assert against the assignor.

## Conclusion

The court enforced an oral trial-condition as a condition precedent to the written installment contract’s effectiveness and ruled that, because the condition failed, the Walkers owed nothing; the assignee stood in the assignor’s shoes and could not recover on a contract that never became operative.


Associates Loan Co. v. Walker, 416 P.2d 529 (N.M. 1966)