Johnson v. Dalton

• Decision Date: 21 November 1958
• Citation: 318 S.W.2d 415
• Parties: Lonny JOHNSON, Administrator of the Estate of James M. Johnson, Deceased, D. R. Holley, and W. S. Jett, Jr., Appellants, v. A. J. DALTON, Appellee.
• Court: United States State Supreme Court — District of Kentucky

Page 415

318 S.W.2d 415

Lonny JOHNSON, Administrator of the Estate of James M Johnson, Deceased, D. R. Holley, and W. S. Jett Jr., Appellants, v. A. J. DALTON, Appellee.

Court of Appeals of Kentucky.

Nov. 21, 1958.

O. T. Hinton, F. M. Burke, Pikeville, for appellants.

J. E. Sanders, Pikeville, Bert T. Combs, Prestonsburg, John Y. Brown, Lexington, for appellee.

CLAY, Commissioner.

This is an action for $283,000 damages for breach of a contract to strip mine coal. It was tried by the court without a jury and plaintiff appellants were awarded approximately $8,000. They appeal on the ground that the court erroneously found the contract had been mutually rescinded about two months after it became effective. Defendant appellee cross-appeals on the ground that no binding contract to strip mine coal at any time existed between the parties.

In 1946 plaintiffs had obtained leases on coal lands. In June of that year by written contract one John Gabor agreed to strip mine the coal on one of the leases and was to produce a minimum of 750 tons per day. Gabor operated under this contract until December 4, 1956. Though he did not produce the required minimum of coal, the operation was profitable to the plaintiffs.

On December 4 Gabor executed a written assignment of his interest in this contract to defendant. The assignment, brief in form, was accepted in writing by defendant. Plaintiffs also signed the instrument, consenting to the assignment and releasing Gabor absolutely from liability under the original contract.

After this assignment no further stripping was done. According to the plaintiffs, the defendant for two months continually assured them that he was obtaining personnel and equipment to perform the contract. According to defendant he had no intention or obligation to perform.

This brings us to the crux of the case. It is the contention of defendant that he had a collateral agreement with the plaintiffs to obtain this assignment from Gabor as their agent, and also to help plaintiffs obtain strippers to work directly for the plaintiffs. He claims the parties never intended that he should perform the contract which was the subject of the assignment.

We are immediately confronted with the application of the so-called 'parol evidence rule'. It is contended by plaintiffs, and the trial court decided, that defendant's parol evidence of the understanding between the parties contradicted or varied the terms of the written assignment, and consequently was inadmissible. On this theory the trial court held defendant bound by the writing to perform according to its terms.

An accurate statement of the 'parol evidence rule' is as follows:

'When two parties have made a contract and have expressed it in writing to which they have both assented as the complete and accurate integration of that contract, evidence, whether parol or otherwise, of antecedent understandings and negotiations will not be admitted for the purpose of varying or contradicting the writing.'

Corbin on Contracts, Section 573 (page 215).

The difficulty is presented when it is claimed, as here, that the parties did not assent to the writing as a complete and accurate integration of their contractual relations. While the writing itself constitutes impressive evidence that it incorporates the final and only agreement of the parties, it is an accepted doctrine that extrinsic evidence may be admissible to avoid the apparent agreement. For example, a party may generally introduce extrinsic evidence of illegality, fraud, duress, mistake, or failure of consideration. See Restatement, Contracts, Section 238. Also a party may show a condition precedent to the taking effect of the contract. Long v. Jones, Ky., 319 S.W.2d 292.

In a broad sense it is varying or contradicting the terms of a written contract when one party undertakes to prove that there was no binding agreement at all, but this is a well recognized exception or qualification of the 'parol evidence rule'. As stated in In re Hicks & Son, 2 Cir., 82 F.2d 277, 279:

'It is well settled that whatever the formal documentary evidence, the parties to a legal transaction may always show that they understood a purported contract not to bind them; * * *. It is no objection that such an understanding contradicts the writing; a writing is conclusive only so far as the parties intend it to be the authoritative memorial of the transaction. Whatever the presumptions, their actual understanding may always be shown except insofar as expressly or implicitly they have agreed that the writing alone shall control.' (Our emphasis.)

In the recent case of Murphy v. Torstrick, Ky., 309 S.W.2d 767, we held it proper to introduce parol evidence to show that what appeared on its face to be a binding written contract was in...