MacDonald's Estate, In re

• Decision Date: 30 August 1966
• Docket Number: No. 1,CA-CIV,1
• Citation: 4 Ariz.App. 94,417 P.2d 728
• Parties: , 36 A.L.R.3d 682 In the Matter of the ESTATE of Netta L. MacDONALD, Deceased. Frank M. PETERSON, Appellant, v. FIRST NATIONAL BANK OF ARIZONA, Appellee. 208.
• Court: Arizona Court of Appeals

Page 728

417 P.2d 728

4 Ariz.App. 94, 36 A.L.R.3d 682

In the Matter of the ESTATE of Netta L. MacDONALD, Deceased.

Frank M. PETERSON, Appellant, v. FIRST NATIONAL BANK OF ARIZONA, Appellee.

No. 1 CA-CIV 208.

Court of Appeals of Arizona.

Aug. 30, 1966.

Rehearing Denied Oct. 3, 1966.

Review Denied Oct. 25, 1966.

Lewis, Roca, Scoville, Beauchamp & Linton, by Charles Crehore, James Moeller and Terry Dean Oehler, Phoenix, for appellant

Moore, Romley, Kaplan, Robbins & Green, by Elias M. Romley and Neal Kurn, Phoenix, for appellee.

CAMERON, Acting Chief Judge.

This is an appeal from an order approving the supplemental accounting of an executor and denying the objections of the appellant made to the said supplemental accounting.

We are called upon to answer two questions: (1) Did the trial court err in admitting evidence of an alleged oral modification of the lease executed by the decedent, and (2) must a person, to be entitled to a set-off against amounts due an estate, file a claim with the executor within four months after notice to creditors as provided by statute (§§ 14--561, 14--570 A.R.S.).

The facts necessary for a determination of this matter are as follows: Mark W. Bobo was the husband of the niece of Netta L. MacDonald. On or about 27 June, 1955, Mark W. Bobo and Netta L. MacDonald entered into a lease of certain real property located in Maricopa County, State of 'The first party (Netta L. MacDonald) agrees that she will pay when due all assessments levied by the Salt River Water Users' Association and the second party (M. W. Bobo) will pay for all excess water used by him.'

Arizona. The lease was on a printed form and provided for $6,800.00 a year rent, payable in two semi-annual payments of $3,400.00 on or before the 1st day of July and the 1st day of January of each year. The lease provided in a typewritten insertion that:

The lease also provided that Bobo would have the option to renew the lease upon the same terms and conditions. The lease was for 5 years, and by letter dated 1 July, 1960, Mark W. Bobo advised Netta L. MacDonald that he wished to renew the lease and said letter was signed as approved by Netta L. MacDonald.

Netta L. MacDonald died on or about 7 October, 1961. The First National Bank of Arizona petitioned to probate the will on 24 October, 1961. Letters testamentary were issued and notice to creditors was given on 16 November, 1961, as provided by statute (§ 14--561 A.R.S.).

The first account and report of the executor was filed 25 July, 1963, and the appellant objected to the allowance of the sum of $10,002.81 as a set-off against the lease between the deceased and M. W. Bobo. It is agreed that M. W. Bobo did not file a creditor's claim with the executor within four months from the date of first notice to creditors as provided in 14--561 A.R.S.

Hearing was held before the court below concerning the nature and the amount of the set-off allowed against the decedent's lease. It is the contention of the executor that Bobo made advances under the lease agreement in the said sum of $10,002.81, and that such advances constituted a prepayment of rent. The executor applied the payment in full satisfaction for the rent which became due to the estate on 1 January and 1 July, 1962, to a payment of part of the rent which became due 1 January, 1963.

It was the testimony of Bobo and his wife that after this lease had been entered into, that certain oral modifications of said lease were agreed to between the deceased and Bobo, and that Bobo would receive credit at the end of the lease period by the amount of certain improvements and expenditures made by Bobo as follows:

                Check Ports                    $   162.00
                2 Acre Feet Pump Water Rights     4340.00
                Pump and Installation             2625.23
                Ditch under Buckeye Road          2815.48
                Sewer Work on Lessee's Home         60.00
                                               ----------
                                               $10,002.81
                

Appellant objected during the hearing in the trial court to the admission of testimony and evidence concerning any oral agreement altering, amending or changing the provisions of the written lease.

THE 'PAROL EVIDENCE RULE'

Appellant's first objection is that the court erred in admitting evidence concerning the oral modification of the lease agreement between decedent and Bobo because this evidence violated the 'parol evidence rule'. The appellant contends that the 'parol evidence rule' bars not only prior and contemporaneous oral agreements, but also any subsequent oral agreement which seeks to modify the terms of a written agreement. In support of this position, appellant cites an Arizona Supreme Court case which states:

'In view of this court's prior decisions applying the parol evidence rule, it is apparent that the trial court erred in admitting in evidence the conversations complained of, antecedent and Subsequent to the execution of the lease between the parties.' Lambros Metals v. Tannous, 71 Ariz. 53, 57, 223 P.2d 570, 572 (1950). (Emphasis ours.)

Our Supreme Court later stated:

'The parol evidence rule, briefly stated, is a prohibition against the admission of extrinsic evidence which would vary the terms of a properly executed instrument. And recently:

(citations) We have held that this is a doctrine of substantive law, not merely an exclusionary rule of evidence.' McNeil v. Attaway, 87 Ariz. 103, 109, 348 P.2d 301, 305 (1959).

'Where two parties have made a written agreement to which they have both assented as a complete and accurate integration of that contract, evidence of antecedent understandings and negotiations will not be admitted for the purpose of varying or contradicting the writing. (citations omitted) This is what has been called 'parol evidence rule' * * *.' Rental Development Corp. of America v. Rubenstein Construction Co., 96 Ariz. 133, 136, 393 P.2d 144, 146 (1964).

A careful reading of Lambros Metals v. Tannous, supra, would indicate that what the court was prohibiting in that case was the admission of parol evidence or oral testimony to vary the terms of an agreement made between the parties. This does not prevent the parties from making a subsequent agreement to alter, vary or amend the prior agreement or terms thereof. As our Supreme Court early stated:

'* * * (N)either of * * * (the parties) may show by parol testimony that the agreement, at the time of this execution or before, was otherwise than is therein expressed. But that does not prevent the parties from subsequently making another and different agreement, or from orally altering, changing, or modifying the written contract when they mutually agree thereon.' Sitkin v. Smith, 35 Ariz. 226 at 230, 276 P. 521, 522, 66 A.L.R. 645 (1929).

This is in agreement with the statement made in Simpson on Contracts, § 63, pages 227--228:

'The parol evidence rule has never prevented proof of an oral or written agreement which varies or contradicts the terms of a prior written contract. If it did, it would be a wholly unwarranted interference with freedom of contract. Parties may change, add to, and totally control what they did in the past. They are wholly unable by any contractual action in the present, to limit or control what they may wish to do contractually in the future.'

In the instant case, parol evidence would not be admissible to vary or amend the unambiguous terms of the lease agreement entered into between the parties. Parol or oral testimony, however, may be admitted to show that the parties to the agreement subsequently changed, altered or modified their previous agreement.

There is also authority for the proposition that the parol evidence rule applies only to the parties to the contract itself, and not to litigation between a party who was a stranger to the contract. For example:

'The parol evidence rule, ORS 41--740, prevents the parties to an integrated written contract from varying or contradicting the terms of the contract when litigating between themselves concerning their rights thereunder. However, parol evidence can be used to vary or contradict a contract when the litigation is between a party to the contract and a stranger thereto. (citations omitted) This is true even when the evidence is offered by the party to the contract.' Carolina Casualty Ins. Co. v. Oregon Auto Insurance Co., Or., 408 P.2d 198, 201 (1965).

We feel and therefore hold that the 'parol evidence rule' did not bar the admission of testimony concerning the subsequent agreements between the parties altering, amending the modifying the prior lease agreement.

'DEAD MAN' STATUTE

Appellant also contends that the so-called 'dead man' statute, § 12--2251 A.R.S., prohibits the Bobos, who stand to benefit therefrom, from testifying as to the alleged oral modification of the lease agreement. The statute reads as follows:

'In an action by or against executors, administrators or guardians in which judgment may be given for or against Our Supreme Court has recently stated:

them as such, neither party shall be allowed to testify against the other as to any transaction with or statement by the testator, intestate or ward unless called to testify thereto by the opposite party, or required to testify thereto by the court. The provisions of this section shall extend to and include all actions by or against the heirs, devisees, legatees, or legal representatives of a decedent arising out of any transaction with the decedent.' § 12--2251 A.R.S.

'As to the application of the Arizona 'Dead Man' statute, A.R.S. § 12--2251, we point out that its application is discretionary with the trial judge, and he can permit testimony regarding conversations and transactions with the deceased whenever he feels justice will be served. Goff v. Guyton, 86 Ariz. 349, 346 P.2d 286 (1959), Steinfield v. Marteny, 40 Ariz. 116, 10 P.2d 367 (1932). In this case we are directed to no evidence of abuse of this discretion. Furthermore, only parties to the action are affected by that statut...