Contracts

Brief

Masterson v. Sine

Procedural History:

• Case tried without a jury and ruled for the Plaintiff.
• Appealed.
• Reversed.

Facts:

• Masterson and his wife owned a ranch as tenants in common.
• February 25, 1958, they conveyed it to Medora and Lu Sine.
  • “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.”
• Since the conveyance Mr. Masterson has gone bankrupt.
• His trustee and wife brought this declatory relief action to establish their right to enforce the option.
• 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 the US income tax regulations.
• 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.
• On appeal the defendants claim extrinsic evidence should not have been admitted.

Issue:

• Does the parol evidence rule exclude extrinsic evidence admitted by the plaintiff and defendant?

Holding:

• No. The court should have allowed extrinsic evidence to be introduced by the defendant.

Reasoning:

• The court looks at integration in determining whether parol evidence should apply.
• When the parties is to a written contract have agreed to it as an integration, mean that the there is a complete and final embodiment of the terms of an agreement, parol evidence can not be used to add to or vary its terms.
• California cases have stated that whether there was an integration is to be determined solely from the face of the instrument and that the question for the court is whether it appears to be a complete agreement.
• The court addresses some policy accommodations including:
  • Policy is based on the assumption that written evidence is more accurate than human memory.
  • Policy based on the fear of fraud or unintentional invention by witnesses interested in the outcome of the litigation will mislead the finder of facts.
• There is nothing in the record to indicate that the parties to this family transaction, through experience in land transactions or otherwise, had any warning of the disadvantages of failing to put the whole agreement in the deed and therefore should be included.
• Defendants offered evidence that the parties agreed that the option was not assignable in order to keep the property in the Masterson family.