Brief Fact Summary. Dallas Masterson and his wife (Plaintiffs) brought an action for declaratory relief to establish their right to enforce a contract option against Medora and Lu Sine (Defendants). Defendants appeal from a judgment in favor of the Plaintiffs.
Synopsis of Rule of Law. When only part of an agreement is integrated parol evidence may be used to prove elements of the agreement not in the writing.
Plaintiffs owned a ranch as tenants in common which they conveyed to Defendants by a grant deed reserving the right to purchase the property for the same consideration as being paid plus depreciation value of any improvements grantee made. Plaintiffs went bankrupt and his trustee in bankruptcy and his wife brought this declaratory relief action to establish their right to enforce the option. The case was tried without a jury. Over the Defendants’ objection the court admitted extrinsic evidence that by the same consideration as being paid both the grantors and grantee meant the sum of $50,000.00 and by depreciation value they meant the depreciation value of improvements to be computed by deducting from the total amount of any capital expenditures made by Defendants the amount of depreciation allowable under United States income tax regulations as the time of exercising the option. The court also precluded that the parol evidence rule precluded admission of extrinsic evidence offered by Defendants to show that the parties wanted the property kept in the Plaintiffs’ family and that the options were personal to the grantors and could not be exercised by the trustee in bankruptcy. The court entered judgment for the Plaintiffs declaring their right to exercise the option.
Issue. Whether the parties intended their writing to serve as the exclusive embodiment of their agreement?
Held. No. Judgment reversed.
The parol testimony should have been admitted since the limitation term would not necessarily be included. When the parties to a written contract have agreed to an integration, which is a complete and final embodiment of the terms of an agreement, parol evidence cannot be used to add or vary the terms. When only part of the agreement is integrated the same rule applies. Evidence of an oral agreement should be excluded when the fact finder is likely to be misled. If additional terms are such that they would certainly have been included in the document in the view of the court then evidence of their alleged making must be kept from the trier of fact.
Here, the option clause in the deed does not explicitly provide that it is a complete agreement and the deed is silent on assignability. Nothing in the record indicates that the parties did not have any warning of the disadvantages of failing to put the whole agreement in the deed. Therefore, this case is one in which it can be said that a collateral agreement might naturally be made as a separate agreement. This case is one that would not have included the collateral agreement in the deed. Defendants offered evidence that the parties agreed that the option was not assignable in order to keep the property within the family.
Dissent. Points of Law - for Law School Success
The statutes in this state clearly manifest a policy in favor of the free transferability of all types of property, including rights under contracts. View Full Point of Law
The majority opinion undermined the parol evidence rule, rendered suspect instruments of conveyance absolute on their face, materially lessened the reliance which might be placed upon written instruments, and opened the door to new technique of defrauding creditors. Discussion.
The parol evidence rule applies only to documents, which are integrations, final expressions of the agreement. A written document does not always represent a deal that the parties consider final. If the parties do intend a document to represent the final expression of their agreement, the document is said to be an integration of their agreement. A partial integration occurs when the document is not intended by the parties to include all the details of their agreement.