Tangren Family Trust v. Tangren

• Decision Date: 29 February 2008
• Docket Number: No. 20070097.,20070097.
• Citation: 182 P.3d 326,2008 UT 20
• Parties: TANGREN FAMILY TRUST, by Richard Tangren, Trustee and Richard Tangren, individually, Plaintiff and Petitioner, v. Rodney TANGREN, Defendant and Respondent.
• Court: Utah Supreme Court

182 P.3d 326

2008 UT 20

TANGREN FAMILY TRUST, by Richard Tangren, Trustee and Richard Tangren, individually, Plaintiff and Petitioner, v. Rodney TANGREN, Defendant and Respondent.

No. 20070097.

Supreme Court of Utah.

February 29, 2008.

Craig C. Halls, Blanding, for plaintiff.

Matthew P. Jube, Provo, for defendant.

On Certiorari to the Utah Court of Appeals

DURRANT, Justice:

INTRODUCTION

¶ 1 We granted certiorari in this case to consider the court of appeals' assessment of the parol evidence rule. The trial court considered extrinsic evidence in determining that the lease at issue is invalid. The court of appeals reversed and held that while the trial court properly considered extrinsic evidence in determining whether the lease is an integrated writing, it erred in finding the lease to be invalid. The court of appeals so concluded primarily because the lease contains a clear integration clause. The court of appeals concluded that the lease is valid, integrated, and unambiguous. We consider the question of when extrinsic evidence is permitted on the question of integration where the contract at issue contains a clear integration clause. We conclude that extrinsic evidence of a separate oral agreement is not admissible in the face of such a clause. Thus, although we affirm the court of appeals' conclusion that the lease is valid, integrated, and unambiguous, we disagree with the court's assessment of the parol evidence rule insofar as it allowed extrinsic evidence to be considered in assessing whether the lease is an integration.

BACKGROUND

¶ 2 In 1981, Richard Tangren purchased approximately 135 acres of unimproved land near the Colorado River from the State Institutional Trust Lands and the Bureau of Land Management. This property has since been held in trust by the Tangren Family Trust, of which Richard is the trustee and his children, including his son Rodney Tangren, are beneficiaries.

¶ 3 Richard decided to build a dude ranch on the land. To this end, he built a building with a basement and connecting tunnels, which he intended to use for storage or guest accommodations, by blasting an area out of the side of a mountain. He also built a horseshoe pit, a tennis court, a baseball diamond, a shooting range, an airplane runway and horse corrals. Notwithstanding these improvements, the property has never actually operated as a dude ranch because it lacks running water, electricity, and facilities to prepare food for guests.

¶ 4 Rodney assisted his father in making these improvements to the ranch. In fact, among all of Richard's children, Rodney was the only one who showed significant interest in the ranch. In order to make progress on improvements at the ranch, Richard kept Rodney on the payroll of Richard's fencing company but allowed Rodney to work at the ranch. In the early 1990s, Rodney quit his job at the fencing company in order to work on the ranch full-time.

¶ 5 At some point, Rodney became concerned that he would lose his investment of capital and time that he had put into the ranch. Specifically, he worried that once the ranch became profitable, his siblings, who are also beneficiaries under the Tangren Family Trust, would attempt to take his interest in the ranch. In 1992, in response to these concerns, Richard had his attorneys prepare a lease agreement (the "Lease"). Under the terms of the Lease, Richard, as trustee of the Tangren Family Trust, agreed to lease the property to Rodney for ninety-nine years at $275 per month, which included rent, taxes, and insurance. The Lease also included an integration clause, which reads as follows: "Entire Agreement: This Lease contains the entire understanding between the parties with respect to its subject-matter, the Property and all aspects of the relationship between Lessee and Lessor." The Lease was first executed in 1992 and again executed in 1994. The only difference between the 1992 and 1994 versions, other than a change in the dates, was the removal of Rodney's wife, Paula Tangren, as a lessee.

¶ 6 In 2001, after Richard and Rodney's relationship deteriorated, Rodney recorded the Lease. Richard thereafter demanded payments under the terms of the Lease from Rodney, and Rodney tendered checks to Richard for the amount owed. Richard never cashed those checks. Richard ultimately filed this action against Rodney. In his original complaint, Richard claimed only that Rodney breached the terms of the Lease and sought to recover Lease payments and payment for Rodney's alleged damage to and removal of Richard's personal property from the ranch. In his amended complaint, filed during the course of the bench trial two years after the original complaint, Richard claimed that Rodney breached the Lease and that the Lease "did not form a valid contract between the parties because the conditions upon which it was entered into were never met." Rodney counterclaimed for damages relating to Richard's alleged trespass on the ranch and claimed fraud and negligent misrepresentation relating to the execution of the Lease.

¶ 7 During the bench trial, both Richard and Rodney testified regarding the Lease. Richard testified that the Lease was not intended to be a lease but rather a "stop gap" measure to prevent Rodney's siblings from taking Rodney's interest in the ranch at some point in the future. Richard testified that he did not intend for the Lease to be valid and that it was only to be used after his death.¹ Rodney also testified that the purpose of the Lease was to protect him from his siblings. And he testified that this protection would be necessary only after his father's death.²

¶ 8 In its Findings of Fact and Order, the trial court found that the Lease was "intended as a protection against an incursion upon [Rodney] by his siblings and was not intended to govern actions as between Richard Tangren and Rodney Tangren and both parties agreed and understood that it would only take effect if challenged by Rodney's siblings." Further, the court found that the Lease "is not a valid document" and that Rodney "knew the `Lease' was not intended as a functioning agreement between the Tangren Trust and [Rodney]." Because it found the Lease to be invalid, the court determined that Rodney had no obligation to pay rent to Richard. The court ordered Rodney off the ranch and provided him six months to remove his personal property. Rodney appealed.

¶ 9 The court of appeals reversed.³ It explained that the trial court properly considered extrinsic evidence in assessing whether the Lease is an integration but that it erred in relying on Richard's "testimony regarding his intent in creating the Lease . . . in the face of a clear and unambiguous integration clause in the Lease itself."⁴ Thus, the court of appeals concluded that "the trial court's findings as to integration were clearly erroneous."⁵ The court of appeals found that the parties entered into a "valid, integrated, and unambiguous lease agreement" and remanded the case for a determination regarding Rodney's alleged breach of the Lease.⁶ We granted certiorari to determine whether the court of appeals erred in its assessment of the parol evidence rule.

STANDARD OF REVIEW

¶ 10 On certiorari, we review the decision of the court of appeals, not the trial court.⁷ Whether a contract is integrated is a question of fact reviewed for clear error,⁸ and whether a contract is ambiguous is a question of law reviewed for correctness.⁹

ANALYSIS

¶ 11 We have expounded on the parol evidence rule on a number of occasions and explained that

as a principle of contract interpretation, the parol evidence rule has a very narrow application. Simply stated, the rule operates, in the absence of fraud or other invalidating causes, to exclude evidence of contemporaneous conversations, representations, or statements offered for the purpose of varying or adding to the terms of an integrated contract.¹⁰

Thus, if a contract is integrated, parol evidence is admissible only to clarify ambiguous terms; it is "not admissible to vary or contradict the clear and unambiguous terms of the contract."¹¹ The application of the parol evidence rule is therefore a two-step process: "First, the court must determine whether the agreement is integrated. If the court finds the agreement is integrated, then parol evidence may be admitted only if the court makes a subsequent determination that the language of the agreement is ambiguous."¹²

¶ 12 We have defined an integrated agreement as "`a writing or writings constituting a final expression of one or more terms of an agreement.'"¹³ To determine whether a writing is an integration, a court must determine whether the parties adopted the writing "as the final and complete expression of their bargain."¹⁴ Importantly, we have explained "that when parties have reduced to writing what appears to be a complete and certain agreement, it will be conclusively presumed, in the absence of fraud, that the writing contains the whole of the agreement between the parties."¹⁵

¶ 13 In this case, the Lease contains an integration clause entitled "Entire Agreement" in which Richard and Rodney explicitly agree that "[t]his Lease contains the entire understanding between the parties with respect to its subject-matter, the Property and all aspects of the relationship between Lessee and Lessor." Integration clauses, such as this one,

"are routinely incorporated in agreements in order to signal to the courts that the parties agree that the contract is to be considered completely integrated. A completely integrated agreement must be interpreted on its face, and thus the purpose and effect of including a merger clause is to preclude the subsequent introduction of evidence of preliminary negotiations or of side agreements in a proceeding in which a court interprets the document."¹⁶

¶ 14 Richard argues that, despite the clear integration clause to the contrary, the written Lease does not, in fact, contain the entire...