Hatley v. Stafford

• Decision Date: 19 December 1978
• Docket Number: No. 75-4433,75-4433
• Citation: 284 Or. 523,588 P.2d 603
• Parties: Michael R. HATLEY, Respondent, v. Margaret R. STAFFORD, Defendant, and Robert R. Stafford and Staffordshire, Inc., a corporation, Appellants. ; SC 25168.
• Court: Oregon Supreme Court

Page 603

588 P.2d 603

284 Or. 523

Michael R. HATLEY, Respondent, v. Margaret R. STAFFORD, Defendant and Robert R. Stafford and Staffordshire, Inc., a corporation, Appellants.

No. 75-4433; SC 25168.

Supreme Court of Oregon, In Banc.

Argued and Submitted April 5, 1978.

Decided Dec. 19, 1978.

Donald A. Gallagher, Jr., Eugene, argued the cause for appellants. On the briefs were Roy E. Adkins, and Jaqua & Wheatley, P. C., Eugene.

[284 Or. 524-A] Stuart M. Brown of Young, Horn, Cass & Scott, Eugene, argued the cause and filed a brief for respondent.

HOWELL, Justice.

Plaintiff, lessee, filed this action for trespass against defendants, lessors. The property involved is a 52-acre farm in Lane County. The defendants contended they were entitled under the lease agreement to terminate the lease and recover possession.

The following is the entire written agreement of the parties relating to the lease:

"Oct. 16, 1974

"Stafford Farm agrees to rent to Mike Hatley Rt. 1 Box 83, Halsey, Ore. approximately 52 acres till Sept. 1st 1975 for the purpose of growing wheat with the follow (sic) condition: Stafford Farm shall have the right to buy out Mr. Mike Hatley at a figure of his cost per acre but not to exceed 70.00 per acre. This buy out is for the express purpose of developing a Mobile Home Park.

"Terms shall be $1800.00 paid on or before Jan. 20th 1975 balance due Sept. 20, 1975. The Rent figure shall be $50.00 per acre.

"Stafford Farm

"By /s/ Robert R. Stafford Mgr.

"By /s/ Mike Hatley"

Plaintiff Hatley alleged that between June 8 and June 11, 1975, defendants trespassed on the property by taking possession of the farm and cutting the immature wheat crop. The defendants alleged in their answer that they exercised their right to terminate the lease in order to build a mobile home park and that they offered to pay plaintiff his cost per acre but not to exceed $70 per acre. Plaintiff demanded $400 per acre, the fair market value of the wheat crop.

In plaintiff's reply, he alleged that the written agreement was not the entire integrated agreement of the parties, and that the parties orally agreed the buy out provision of the lease would apply only for a period of 30 to 60 days after the execution of the lease.

The trial court allowed plaintiff to introduce evidence concerning the alleged oral agreement limiting the time in which the buy out provision could be exercised. The jury returned a verdict for plaintiff, and defendants appeal. The only error asserted on appeal is that the trial court erred in allowing admission of the parol evidence relating to the time limit on the buy out agreement.

The parol evidence rule ¹ applies only to those aspects of a bargain that the parties intend to memorialize in the writing. Caldwell et ux. v. Wells, 228 Or. 389, 395, 365 P.2d 505 (1961). The fact that a writing exists does not bring the rule into play if the parties do not intend the writing to embody their final agreement. National Cash Register Co. v. IMC, Inc., 260 Or. 504, 491 P.2d 211 (1971); Sternes v. Tucker, 239 Or. 105, 395 P.2d 881 (1964); Bouchet v. Oregon Motor Car Co., 78 Or. 230, 152 P. 888 (1915). Neither does the rule apply when the parties intended the writing to contain only part of their agreement. Stevens v. Good Samaritan Hosp., 264 Or. 200, 504 P.2d 749 (1972); Hirsch v. Salem Mills Co., 40 Or. 601, 67 P. 949, Reh. denied 68 P. 733 (1902); Contract Co. v. Bridge Co., 29 Or. 549, 46 P. 138 (1896). See also 3A Corbin on Contracts § 581 (1960).

In the present case, plaintiff sought to show that the written lease was a "partial integration," I. e., that the written contract included some, but not all, of the terms of the actual agreement. Defendants contend that such a showing could be made only if the oral agreement was "not inconsistent" with the writing and was "an agreement as might naturally be made as a separate agreement * * *." Caldwell et ux. v. Wells, supra, 228 Or. at 395, 365 P.2d at 508. Plaintiff argues that these limitations apply only after it has been demonstrated that the writing is a complete integration, that whether a writing was intended to be a complete integration is a question of fact, and that the jury may consider any relevant evidence in deciding this question of fact. Both parties find support for their positions in past opinions by this court. Compare Stevens v. Good Samaritan Hosp., supra, and Land Reclamation v. Riverside Corp., 261 Or. 180, 492 P.2d 263 (1972) (both supporting plaintiff's position) with Caldwell et ux. v. Wells, supra, and DeVore v. Weyerhaeuser Co., 265 Or. 388, 508 P.2d 220 (1973), Cert. denied 415 U.S. 913, 94 S.Ct. 1408, 39 L.Ed.2d 467 (1974) (both supporting defendants' position). A brief review of these cases will illustrate the difficulty of the problem.

In Caldwell, defendant agreed to sell plaintiff a house and a lot and also promised that a well would be drilled on the lot. The parties executed a one-page "Earnest Money Receipt" that made no mention of the promise to drill the well. This court held that the parol evidence rule applied only to those aspects of the bargain that the parties intended to memorialize in the writing, and that whether or not the "Earnest Money Receipt" was intended to embody the entire agreement was a question of fact. Having done this, we then adopted the Restatement of Contracts position, which states:

"(1) An oral agreement is not superseded or invalidated by a subsequent or contemporaneous integration, nor a written agreement by a subsequent integration relating to the same subject-matter, if the agreement is not inconsistent with the integrated contract, and

"(a) is made for separate consideration, or

"(b) is such an agreement as might naturally be made as a separate agreement by parties situated as were the parties to the written contract." 1 Restatement of Contracts 335, § 240 (1932).

Because the promise to have the well drilled might naturally be made as an agreement separate from the promise to convey the land, we held that parol evidence was admissible to prove the former promise.

In Stevens v. Good Samaritan Hosp., supra, defendant contended that evidence of an oral agreement should have been excluded under the parol evidence rule. We said:

"The complaint alleged that certain terms of the employment contract were memorialized in a collective bargaining agreement, but other terms were orally agreed upon between the parties to this proceeding. This is an allegation of an unintegrated agreement; therefore, the parol evidence rule does not apply." 264 Or. at 202, 504 P.2d at 750.

No mention was made of the Restatement test.

Land Reclamation v. Riverside Corporation, supra, involved a deed purporting to transfer real property without restriction and a prior land sale contract restricting the property to use as a sanitary landfill. We held that the land sale contract was an agreement that might naturally be made separately from the deed, and that parol evidence was therefore admissible to prove the restriction. In dicta, however, we stated that "s 240 (of the Restatement) assumes that the adoption of the writing has been proved. * * * (I)f the previous agreement is not of the type which might naturally be made as a separate agreement, it will nevertheless control if it is shown that the parties intended that agreement, rather than the subsequent writing should control." 261 Or. at 183, n. 4, 492 P.2d at 264.

The dicta in Land Reclamation subsequently was contradicted by dicta in DeVore v. Weyerhaeuser Co., supra, although DeVore did not cite Land Reclamation by name. DeVore involved an industry-wide collective bargaining agreement that defendant employer sought to show was inapplicable to plaintiff employees. The employer alleged an oral agreement to exclude the employees from certain provisions of the collective bargaining agreement and the employees claimed that proof of the oral agreement was barred by the parol evidence rule. We stated the general rule that, "Whether the parties intended to integrate their agreement in the writing is a question of fact in each case," but then went on to note:

"If this were the correct rule, without any further limitations, evidence could always be offered of any prior or contemporaneous oral agreement and in all cases the question whether the parties intended to supersede such an oral agreement by the integration of their entire agreement into the terms of the written contract would be a question of fact which must always be submitted to the trier of the facts, whether court or jury. It may be said, however, with some justification, that the adoption of such a rule, without any limitations, would emasculate, if not 'repeal,' the parol evidence rule, which is a rule adopted by statute in Oregon, as in many other states." 265 Or. at 400-01, 508 P.2d at 225-226 (footnote omitted).

We then stated that the Restatement criteria imposed "limitations" on the evidence that can be considered in determining the intent of the parties. Nevertheless, we held the parol evidence admissible because representatives of the employees had admitted that the writing was not intended to be a complete integration.

The inconsistency in our prior decisions reflects a long-standing disagreement among courts and commentators generally as to the applicability of the parol evidence rule. Before examining the merits of the conflicting views, it is useful to consider the background and theory of the rule. The rule apparently was an outgrowth of the law governing contracts under seal. Because the King's word was indisputable, the King's seal on a document made the document uncontestable. 9 J. Wigmore, Evidence 83, § 2426 (3d ed. 1940). The status of writings was further enhanced by the enactment of the Statute of Wills and the Statute of Frauds, both of which made certain transactions legally unenforceable unless they were in writing. This theory was gradually applied to contracts...