Masterson v. Sine

• Court: United States State Supreme Court (California)
• Writing for the Court: TRAYNOR; BURKE; McCOMB
• Citation: 68 Cal.2d 222,65 Cal.Rptr. 545,436 P.2d 561
• Parties: , 436 P.2d 561 Rebecca D. MASTERSON et al., Plaintiffs and Respondents, v. Lu E. SINE et al., Defendants and Appellants. Sac. 7725.
• Decision Date: 06 February 1968

Page 545

65 Cal.Rptr. 545

68 Cal.2d 222, 436 P.2d 561

Rebecca D. MASTERSON et al., Plaintiffs and Respondents, v. Lu E. SINE et al., Defendants and Appellants.

Sac. 7725.

Supreme Court of California,

In Bank.

Feb. 6, 1968.

As Modified on Denial of Rehearing March 6, 1968.

Rawlins Coffman and Noel Watkins, Red Bluff, for defendants and appellants.

Glicksberg, Kushner & Goldberg, Lawrence Goldberg, San Francisco, Truce & Veal, Harlan Veal, San Carlos, and Duard F. Geis, Willows, for plaintiffs and respondents.

TRAYNOR, Chief Justice.

Dallas Masterson and his wife Rebecca owned a ranch as tenants in common. On February 25, 1958, they conveyed it to Medora and Lu Sine by a grant deed 'Reserving unto the Grantors herein an option to purchase the above described property on or before February 25, 1968' for the 'same consideration as being paid heretofore plus their depreciation value of any improvements Grantees may add to the property from and after two and a half years from this date.' Medora is Dallas' sister and Lu's wife. Since the conveyance Dallas has been adjudged bankrupt. His trustee in bankruptcy and Rebecca brought this declaratory relief action to establish their right to enforce the option.

The case was tried without a jury. Over defendants' objection the trial court admitted extrinsic evidence that by 'the same consideration as being paid heretofore' both the grantors and the grantees meant the sum of $50,000 and by 'depreciation value of any improvements' they meant the depreciation value of improvements to be computed by deducting from the total amount of any capital expenditures made by defendants grantees the amount of depreciation allowable to them under United States income tax regulations as of the time of the exercise of the option.

The court also determined that the parol evidence rule precluded admission of extrinsic evidence offered by defendants to show that the parties wanted the property kept in the Masterson family and that the option was therefore personal to the grantors and could not be exercised by the trustee in bankruptcy.

The court entered judgment for plaintiffs, declaring their right to exercise the option, specifying in some detail how it could be exercised, and reserving jurisdiction to supervise the manner of its exercise and to determine the amount that plaintiffs will be required to pay defendants for their capital expenditures if plaintiffs decide to exercise the option.

Defendants appeal. They contend that the option provision is too uncertain to be enforced and that extrinsic evidence as to its meaning should not have been admitted. The trial court properly refused to frustrate the obviously declared intention of the grantors to reserve an option to repurchase by an overly meticulous insistence on completeness and clarity of written expression. (See California Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474, 481, 289 P.2d 785, 49 A.L.R.2d 496; Rivers v. Beadle (1960) 183 Cal.App.2d When the parties to a written contract have agreed to it as an 'integration'--a complete and final embodiment of the terms of an agreement--parol evidence cannot be used to add to or vary its terms. (Pollyanna Homes, Inc. v. Berney (1961) 56 Cal.2d 676, 679--680, 16 Cal.Rptr. 345, 365 P.2d 401; Hale v. Bohannon (1952) 38 Cal.2d 458, 465, 241 P.2d 4; see 3 Corbin, Contracts (1960) § 573, p. 357; Rest., Contracts (1932) §§ 228 (and com. a), 237; Code Civ.Proc., § 1856; Civ.Code, § 1625.) When only part of the agreement is integrated, the same rule applies to that part, but parol evidence may be used to prove elements of the agreement not reduced to writing. (Hulse v. Juillard Fancy Foods Co. (1964) 61 Cal.2d 571, 573, 39 Cal.Rptr. 529, 394 P.2d 65; Schwartz v. Shapiro (1964) 229 Cal.App.2d 238, 250, 40 Cal.Rptr. 189; Mangini v. Wolfschmidt, Ltd. (1958) 165 Cal.App.2d 192, 200--201, 331 P.2d 728; Rest., Contracts (1932) § 239.)

[436 P.2d 563] 691, 695--697, 7 Cal.Rptr. 170.) It properly admitted extrinsic evidence to explain the language of the deed (Nofziger v. Holman (1964) 61 Cal.2d 526, 528, 39 Cal.Rptr. 384, 393 P.2d 696; Barham v. Barham (1949) 33 Cal.2d 416, 422--423, 202 P.2d 289; Union Oil Co. v. Union Sugar Co. (1948) 31 Cal.2d 300, 306, 188 P.2d 470; Schmidt v. Macco Construction Co. (1953) 119 Cal.App.2d 717, 730, 260 P.2d 230; see Farnsworth, 'Meaning' in the Law of Contracts (1967) 76 Yale L.J. 939, 959--965; Corbin, The Interpretation of Words and the Parol Evidence Rule (1965) 50 Cornell L.Q. 161) to the end that the consideration for the option would appear with sufficient certainty to permit specific enforcement (see McKeon v. Santa Claus of California, Inc. (1964) 230 Cal.App.2d 359, 364, 41 Cal.Rptr. 43; Burrow v. Timmsen (1963) 223 Cal.App.2d 283, 288, 35 Cal.Rptr. 668, 100 A.L.R.2d 544). The trial court erred, however, in excluding the extrinsic evidence that the option was personal to the grantors and therefore nonassignable.

The crucial issue in determining whether there has been an integration is whether the parties intended their writing to serve as the exclusive embodiment of their agreement. The instrument itself may help to resolve that issue. It may state, for example, that 'there are no previous understandings or agreements not contained in the writing,' and thus express the parties' 'intention to nullify antecedent understandings or agreements.' (See 3 Corbin, Contracts (1960) § 578, p. 411.) Any such collateral agreement itself must be examined, however, to determine whether the parties intended the subjects of negotiation it deals with to be included in, excluded from, or otherwise affected by the writing. Circumstances at the time of the writing may also aid in the determination of such integration. (See 3 Corbin, Contracts (1960) §§ 582--584; McCormick, Evidence (1954) § 216, p. 441; 9 Wigmore, Evidence (3d ed. 1940) § 2430, p. 98, § 2431, pp. 102--103; Witkin, Cal. Evidence (2d ed. 1966) § 721; Schwartz v. Shapiro, supra, 229 Cal.App.2d 238, 251, fn. 8, 40 Cal.Rptr. 189; contra, 4 Williston, Contracts (3d ed. 1961) § 633, pp. 1014--1016.)

California cases have stated that whether there was an integration is to be determined solely from the face of the instrument (e.g., Thoroman v. David (1926) 199 Cal. 386, 389--390, 249 P. 513; Heffner v. Gross (1919) 179 Cal. 738, 742--743, 178 P. 860; Gardiner v. McDonogh (1905) 147 Cal. 313, 318--321, 81 P. 964; Harrison v. McCormick (1891) 89 Cal. 327, 330, 26 P. 830), and that the question for the court is whether it 'appears to be a complete * * * agreement * * *.' (See Ferguson v. Koch (1928) 204 Cal. 342, 346, 268 P. 342, 344, 58 A.L.R. 1176; Harrison v. McCormick, supra, 89 Cal. 327, 330, 26 P. 830.) Neither of these strict formulations of the rule, however, has been consistently applied. The requirement that the writing must appear incomplete on its face has been repudiated in many cases where parol evidence was admitted 'to prove the existence of a separate oral agreement as to any In formulating the rule governing parol evidence, several policies must be accommodated. One policy is based on the assumption that written evidence is more accurate than human memory. (Germain Fruit Co. v. J. K. Armsby Co. (1908) 153 Cal. 585, 595, 96 P. 319.) This policy, however, can be adequately served by excluding parol evidence of agreements that directly contradict the writing. Another policy is based on the fear that fraud or unintentional invention by witnesses interested in the outcome of the litigation will mislead the finder of facts. (Germain Fruit Co. v. J. K. Armsby Co., supra, 153 Cal. 585, 596, 96 P. 319; Mitchill v. Lath (1928) 247 N.Y. 377, 388, 160 N.E. 646, 68 A.L.R. 239 (dissenting opinion by Lehman, J.); see 9 Wigmore, Evidence (3d ed. 1940) § 2431, p. 102; Murray, The Parol Evidence Rule: A Clarification (1966) 4 Duquesne L.Rev. 337, 338--339.) McCormick has suggested that the party urging the spoken as against the written word is most often the economic underdog, threatened by severe hardship if the writing is enforced. In his view the parol evidence rule arose to allow the court to control the tendency of the jury to find through sympathy and without a dispassionate assessment of the probability of fraud or faulty memory that the parties made an oral agreement collateral to the written contract, or that preliminary tentative agreements were not abandoned when omitted from the writing. (See McCormick, Evidence (1954) § 210.) He recognizes, however, that if this theory were adopted in disregard of all other considerations, it would lead to the exclusion of testimony concerning oral agreements whenever there is a writing and thereby often defeat the true intent of the parties. See McCormick, op. cit. supra, § 216, p. 441.)

[436 P.2d 564] matter on which the document is silent and which is not inconsistent with its terms'--even though the instrument appeared to state a complete agreement. (E.g., American Industrial Sales Corp. v. Airscope, Inc. (1955) 44 Cal.2d 393, 397, 282 P.2d 504, 506, 49 A.L.R.2d 1344; Stockburger v. Dolan (1939) 14 Cal.2d 313, 317, 94 P.2d 33, 128 A.L.R. 83; Crawford v. France (1933) 219 Cal. 439, 443, 27 P.2d 645; Buckner v. A. Leon & Co. (1928) 204 Cal. 225, 227, 267 P. 693; Sivers v. Sivers (1893) 97 Cal. 518, 521, 32 P. 571; cf. Simmons v. California Institute of Technology (1949) 34 Cal.2d 264, 274, 209 P.2d 581.) Even under the rule that the writing alone is to be consulted, it was found necessary to examine the alleged collateral agreement before concluding that proof of it was precluded by the writing alone. (See 3 Corbin, Contracts (1960) § 582, pp. 444--446.) It is therefore evident that 'The conception of a writing as wholly and intrinsically self-determinative of the parties' intent to make it a sole memorial [68 Cal.2d 227] of one or seven or twenty-seven subjects of negotiation is an impossible one.' (9 Wigmore, Evidence (3d ed. 1940) § 2431,...