Masterson v. Sine

Supreme Court of California · 1968 · Contracts

Contractsparol evidence ruleintegrationextrinsic evidenceparol evidenceintegrationpartial integrationcollateral agreement

Facts

Dallas and Rebecca Masterson conveyed a ranch to Medora and Lu Sine by grant deed while reserving an option to repurchase the property on or before February 25, 1968, for the same consideration previously paid plus the depreciation value of improvements added after two and a half years. After the conveyance, Dallas was adjudged bankrupt, and his trustee in bankruptcy joined Rebecca in seeking to enforce the option. The trial court admitted extrinsic evidence explaining what the parties meant by the price language in the option. It refused, however, to admit defendants' offered extrinsic evidence that the parties intended the option to be personal to the grantors so the property would remain in the Masterson family.

Issue

Whether the parol evidence rule barred defendants from introducing extrinsic evidence that the repurchase option reserved in the deed was intended to be personal to the grantors and therefore nonassignable. Relatedly, whether the deed's option provision was a complete integration on that subject.

Rule

Parol evidence cannot add to or vary the terms of a written agreement when the writing is intended as a complete and final embodiment of the parties' agreement. If only part of the agreement is integrated, parol evidence may prove elements not reduced to writing. The crucial question is whether the parties intended the writing to serve as the exclusive embodiment of their agreement, and evidence of a collateral oral agreement should be excluded only when the agreement is not one that might naturally be made as a separate agreement by parties in the circumstances of the case.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Elena Ruiz sold a cabin outside Santa Fe to her cousin, Marco Ruiz, by a signed deed that reserved to Elena "an option to repurchase within five years for the original price plus the value of later improvements." The deed contains no merger clause and says nothing about whether the option may be assigned. When Elena later assigns the option to a lender, Marco offers testimony that the family orally agreed the option was personal to Elena so the cabin would stay within the Ruiz family.

Should the court exclude Marco's testimony under the parol evidence rule solely because the deed is a written instrument affecting land?

Explanation. The majority held that the key issue is whether the parties intended the writing to be the complete and final embodiment of their agreement. A court may consider the instrument and surrounding circumstances, not just the face of the writing. Where the deed has no merger-type clause, is silent on assignability, and the alleged limitation is one that might naturally be made separately, parol evidence is not automatically barred.