Title: SPRAGGINS v ELVIDGE

State: montana

Issuer: Montana Supreme Court

Document:

No. 80-207 IN THE SUPREME COURT OF THE STATE OF MONTANA 1981 HUGH A. SPRAGGINS, Plaintiff and Respondent, -vs- GARY L. ELVIDGE, Defendant and Appellant. Appeal from: District Court of the Sixth Judicial District, In and for the County of Park, The Honorable Jack D. Shanstrom, Judge presiding. Counsel of Record: For Appellant: Berger, Anderson, Sinclair, Murphy, Nelson, Edwards, McGimpsey an Molloy, Billings, Montana For Respondent : Yardley and Yardley, Livingston, Montana Submitted on Briefs: October 23, 1980 Decided : Filed: PPR ! 4g87' Clerk Mr. Justice John Conway Harrison delivered the Opinion of the Court. Appellant-defendant, Gary Elvidge, and respondent- plaintiff, Hugh Spraggins, were engaged in a business called Diablo Mobile Repair in California. As partners, they sold and transferred the business to a third party in 1978. In September 1977 appellant and respondent contracted to purchase equally stock shares of the Mint Bar of Livingston, Inc., from George A. and Donna F. Moore. Each partner was to participate and share in the new business. The California business was sold. From the total purchase price, $12,500 was invested in the Mint Bar. Later, appellant agreed to buy, and respondent agreed to sell, respondent's interest in the 1501 shares of stock of the Mint Bar. The parties entered into a contract (assignment of agreement and a release) on August 31, 1978. Prior to this time appellant and respondent discussed the sale and purchase of the stock of the Mint Bar. These discussions covered all business interests of the partners including the California business. Respondent and his wife testified that appellant was entitled to one half of the proceeds from the sale of Diablo Mobile Repair and one half of the cash on hand. Respondent claims, and the District Court found, that appellant and respondent mutually agreed, prior to the signing and execution of the assignment of agreement, that the sum of $25,000 would be paid by appellant to respondent. Respondent contends the amount was in full settlement of all transactions between respondent and appellant. Any interest appellant had in the Diablo Mobile Repair was completely s e t t l e d and r e s o l v e d and any i n t e r e s t respondent had i n t h e s h a r e s of s t o c k of t h e Mint Bar was completely s e t t l e d . Appellant p a i d respondent $15,000 on September 5 , 1978, and executed a promissory n o t e f o r $10,000 payable t o respondent f o r t h e remaining amount. A p p e l l a n t f a i l e d t o pay t h e $10,000 promissory n o t e when due, and respondent commenced t h i s a c t i o n . A p p e l l a n t counterclaimed f o r monies due and owing him from t h e s a l e of t h e C a l i f o r n i a b u s i n e s s a s a s e t o f f f o r t h e amount due t o respondent on t h e promissory n o t e . The D i s t r i c t Court found i n f a v o r of r e s p o n d e n t ' s c l a i m f o r c o l l e c t i o n of t h e promissory n o t e and a g a i n s t a p p e l l a n t on h i s c l a i m of s e t o f f a s a r e s u l t of t h e s a l e of t h e C a l i f o r n i a b u s i n e s s . A p p e l l a n t contends t h a t t h e o n l y w r i t t e n agreement b e t w e e n t h e p a r t i e s p e r t a i n s t o t h e t e r m i n a t i o n o f r e s p o n d e n t ' s i n t e r e s t i n t h e Mint Bar. The assignment of agreement and t h e r e l e a s e executed by t h e p a r t i e s both p r o v i d e t h a t t h e c o n s i d e r a t i o n t o be g i v e n by a p p e l l a n t t o respondent is $25,000. Nowhere i n e i t h e r of t h e s e documents is t h e r e any mention of t h e Diablo Mobile Repair o r t h e sums due and owing from respondent t o a p p e l l a n t a s a consequence of t h e s a l e t h e r e o f . A p p e l l a n t a r g u e s t h e D i s t r i c t Court a l l o w e d r e s p o n d e n t t o a l t e r t h e t e r m s o f t h e w r i t t e n c o n t r a c t by a d d i n g a p p r o x i m a t e l y $ 1 5 , 0 0 0 a s t h e t o t a l c o n s i d e r a t i o n p a i d ( a p p e l l a n t ' s a l l e g e d one h a l f of t h e p r o c e e d s from t h e s a l e of Diablo Mobile R e p a i r ) . The D i s t r i c t Court made t h e f o l l o w i n g f i n d i n g : " T h a t R u l e 106 o f t h e Montana R u l e s o f E v i d e n c e a p p l i e s a s t o t h e a d m i s s i o n o f e v i d e n c e by P l a i n t i f f t o D e f e n d a n t ' s c o u n t e r c l a i m and a f f i r m a t i v e d e f e n s e and t h a t the Montana completeness doctrine rule allows evidence by Plaintiff that all business transactions were resolved between Plaintiff and Defendant, specifically including Diablo Mobile Repair." This finding permitted the District Court to modify the written agreement. The sole issue in this appeal is whether Rule 106, Mont.R.Evid., allows parol evidence under the facts of this case. We find the District Court erred in allowing parol evidence to alter and vary the terms of this written agreement under the theory of the completeness doctrine. Respondent does not argue that this case represents one where testimony was offered and properly admitted as part of one of the exceptions of the parol evidence rule. Instead, Rule 106, Mont.R.Evid., was used to modify the written contract. The relevant statutes which address parol evidence are set forth below. Section 28-2-904, MCA: "The execution of a contract in writing, whether the law requires it to be written or not, supersedes all the oral negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument." Section 72-11-304, MCA: "(1) When the terms of an agreement have been reduced to writing by the parties, it is to be considered as containing all those terms, and therefore there can be between the parties and their representatives or successors in interest no evidence of the terms of the agreement other than the contents of the writing, except in the following cases: "(a) where a mistake or imperfection of the writing is put in issue by the pleadings; " ( b ) where t h e v a l i d i t y of t h e agreement is t h e f a c t i n d i s p u t e . " ( 2 ) But t h i s s e c t i o n does n o t exclude o t h e r evidence of t h e c i r c u m s t a n c e s under which t h e agreement was made o r t o which it r e l a t e s , a s d e f i n e d i n 1-4-102, o r t o e x p l a i n an ex- t r i n s i c ambiguity or t o e s t a b l i s h i l l e g a l i t y or f r a u d . " ( 3 ) The term agreement i n c l u d e s deeds and w i l l s , a s w e l l a s c o n t r a c t s between p a r t i e s . " S e c t i o n 1-4-102, MCA: "For t h e p r o p e r c o n s t r u c t i o n o f a n i n s t r u m e n t , t h e c i r c u m s t a n c e s under which it was made, i n c l u d i n g t h e s i t u a t i o n o f t h e s u b j e c t of t h e i n s t r u m e n t and o f t h e p a r t i e s t o it, may a l s o be shown s o t h a t t h e judge be p l a c e d i n t h e p o s i t i o n o f t h o s e whose language he is t o i n t e r p r e t . " None of t h e p a r o l evidence e x c e p t i o n s c o n t a i n e d i n s e c t i o n 72-11-304, MCA, a p p l y h e r e . R e s p o n d e n t n e v e r claimed i n h i s p l e a d i n g s t h a t t h e w r i t i n g s were i m p e r f e c t . No one a s s a i l e d t h e v a l i d i t y o f t h e c o n t r a c t . S e c t i o n 28-2-904, MCA, is c o n t r o l l i n g . When t h e c o n t r a c t is c l e a r and unequivocal on its f a c e , s e c t i o n 1-4-102, MCA, d o e s n o t apply. Ryan v. Ald, I n c . ( 1 9 6 5 ) , 146 Mont. 299, 406 P.2d 373. W e have h e r e a w r i t t e n c o n t r a c t . The c o n t r a c t is signed by a p p e l l a n t and respondent. The w r i t t e n c o n t r a c t is c l e a r on its f a c e . I t speaks d i r e c t l y and e x c l u s i v e l y of t h e Mint Bar. The " o r a l " agreement which preceded t h e w r i t t e n agreement does n o t c o n t r o l , nor can it be allowed t o a l t e r t h e terms of t h e w r i t t e n c o n t r a c t . "The p r i n c i p l e is w e l l - e s t a b l i s h e d and of g e n e r a l a p p l i c a t i o n , s u b j e c t t o c e r t a i n e x c e p t i o n s , t h a t - - when a c o n t r a c t h a s been - - - - - r e d u c e d t o w r i t i n q t h e c o n t e n t s o f s u c h ----------------- ------------------- w r i t i n g c a n n o t b e added t o , c o n t r a d i c t e d , -- ---------------- a l t e r e d , o r v a r i e d b y p a r o l o r e x t r i n s i c .................... - - - evidence, and t h a t such w r i t i n g s u p e r s e d e s a l l o r a l n e g o t i a t i o n s concerning its m a t t e r which preceded, accompanied, o r l e d up t o its e x e c u t i o n . T h i s was t h e r u l e a t common law, and has been embodied i n t h e s t a t u t e law of t h i s s t a t e . " Leigland v. McGaff i c k ( 1 9 5 9 ) , 135 Mont. 188, 338 P.2d 1037. Rule 106, Mont.R.Evid., p r o v i d e s i n p e r t i n e n t p a r t : " ( a ) When p a r t o f an a c t , d e c l a r a t i o n , c o n v e r s a t i o n , w r i t i n g o r recorded s t a t e m e n t o r s e r i e s t h e r e o f is i n t r o d u c e d by a p a r t y : (1) an a d v e r s e p a r t y may r e q u i r e him a t t h a t t i m e t o i n t r o d u c e any o t h e r p a r t of such i t e m o r s e r i e s t h e r e o f which ought i n f a i r n e s s t o be considered a t t h a t t i m e ; . . ." (Emphasis s u p p l i e d . ) Without even d i s c u s s i n g t h e par01 evidence r u l e t h e D i s t r i c t Court r e l i e d on Rule 106 i n modifying and v a r y i n g t h e terms of a w r i t t e n agreement. Such was never t h e i n t e n t of Rule 106. Rule 106 of t h e F e d e r a l Rules of Procedure is t h e c o u n t e r p a r t t o Montana's Rule 106, and, according t o t h e a d v i s o r y committee's n o t e , t h e f e d e r a l r u l e is based on two c o n s i d e r a t i o n s : (1) t h e danger of t a k i n g m a t t e r s o u t of c o n t e x t , and ( 2 ) t h e inadequacy of delayed completeness a s a remedy. See 21 Wright and Graham, F e d e r a l P r a c t i c e and Procedure: Evidence, S 5007 a t 367. No one introduced p a r t of an a c t o r w r i t i n g i n t h i s c a s e . Respondent i n t r o d u c e d a l l of t h e w r i t i n g s governing t h e buy o u t of t h e Mint Bar o p e r a t i o n . A l l of t h e terms surrounding t h e c o n s i d e r a t i o n t o be p a i d t o respondent f o r t h e s u r r e n d e r i n g of h i s i n t e r e s t i n t h e Mint Bar were o f f e r e d and r e c e i v e d i n evidence. W e a d d r e s s e d a s i m i l a r i s s u e i n S t a t e Highway Commission v. Churchwell ( 1 9 6 5 ) , 146 Mont. 52, 403 P.2d 751, where t h e p a r t i e s were c o n t e s t i n g a j u r y award of t h e t a k i n g of land by condemnation. The p a r t i e s were a r g u i n g about t h e f a i r market v a l u e of t h e l a n d t h a t was taken. A t t h e t r i a l , t o e s t a b l i s h t h e v a l u e o f t h e p r o p e r t y , t h e landowners o f f e r e d f i n a l agreements of s a l e f o r l a n d i n t h e v i c i n i t y of t h e land i n q u e s t i o n t o demonstrate t h e v a l u e of t h e i r land. The S t a t e t h e n , over o b j e c t i o n , was allowed t o i n t r o d u c e a l l documents r e g a r d i n g t h e n e g o t i a t i o n s t h a t l e d t o each of t h e v a r i o u s s a l e s . The S t a t e argued t h a t t h e e n t i r e f i l e s were a d m i s s i b l e under s e c t i o n 93-401-11, R.C.M. 1947. That s e c t i o n was t h e p r e d e c e s s o r and f o r e r u n n e r t o Rule 106, Mont .R. Evid., and read: "When p a r t o f a n a c t , d e c l a r a t i o n , c o n v e r s a t i o n , o r w r i t i n g is g i v e n i n evidence by one p a r t y , t h e whole on t h e same s u b j e c t may be i n q u i r e d i n t o by t h e o t h e r ; when a l e t t e r is r e a d , t h e answer may be g i v e n ; and when a d e t a c h e d a c t , d e c l a r a t i o n , c o n v e r s a t i o n , o r w r i t i n g is g i v e n i n e v i d e n c e , a n y o t h e r a c t , d e c l a r a t i o n , c o n v e r s a t i o n o r w r i t i n g , which is n e c e s s a r y t o make it understood, may a l s o be given i n evidence . " W e r e j e c t e d t h e S t a t e ' s a r g u m e n t i n C h u r c h w e l l , s t a t i n g : "'When a c o n t r a c t is reduced t o w r i t i n g , t h e i n t e n t i o n of t h e p a r t i e s is t o be a s c e r t a i n e d from t h e w r i t i n g a l o n e , i f p o s s i b l e ; s u b j e c t , however, t o t h e o t h e r p r o v i s i o n s of t h i s c h a p t e r . ' ( S e c t i o n 13-705.) "'When t h e terms of an agreement have been reduced t o w r i t i n g by t h e p a r t i e s , it is t o be considered a s c o n t a i n i n g a l l t h o s e terms, and t h e r e f o r e t h e r e c a n b e b e t w e e n t h e p a r t i e s and t h e i r r e p r e s e n t a t i v e s , o r s u c c e s s o r s i n i n t e r e s t , no evidence of t h e t e r m s o f t h e a g r e e m e n t o t h e r t h a n t h e c o n t e n t s o f t h e w r i t i n g , e x c e p t i n t h e following c a s e s : 1 Where a mistake o r i m p e r f e c t i o n of t h e w r i t i n g is p u t i n i s s u e by t h e p l e a d i n g s . " ' 2 . Where t h e v a l i d i t y of t h e agreement is t h e f a c t i n d i s p u t e . "'But t h i s s e c t i o n does n o t e x c l u d e o t h e r evidence of t h e c i r c u m s t a n c e s under which t h e agreement was made, o r t o which it r e l a t e s , a s d e f i n e d i n s e c t i o n 93-401-17, o r t o e x p l a i n a n e x t r i n s i c a m b i g u i t y , o r t o e s t a b l i s h i l l e g a l i t y o r f r a u d . The term agreement i n c l u d e s deeds and w i l l s , a s w e l l a s c o n t r a c t s between p a r t i e s . ' ( S e c t i o n "A c a r e f u l s t u d y of t h e n e g o t i a t i o n agree- ments i n t h e N e g o t i a t i o n F i l e shows t h a t t h e agreement speaks f o r i t s e l f and t h a t s e c t i o n 93-401-11, R.C.M. 1947, h a s no a p p l i c a t i o n . " 403 P.2d a t 754-55. I n t h e i n s t a n t c a s e respondent o f f e r e d t h e p a r o l t e s t i m o n y t o v a r y and a l t e r t h e t e r m s o f a w r i t t e n instrument. T h i s cannot be done. For t h i s Court t o hold o t h e r w i s e would, i n e f f e c t , rob t h e p a r o l evidence r u l e and t h e corresponding Montana s t a t u t e s of any v i t a l i t y a t a l l . Rule 106 is a p r o c e d u r a l r u l e and does n o t a f f e c t t h e s u b s t a n c e of t h e e x i s t i n g law of p a r o l evidence. W e a f f i r m i n p a r t t h e D i s t r i c t C o u r t ' s f i n d i n g t h a t a p p e l l a n t is l i a b l e f o r t h e $10,000 promissory n o t e . W e r e v e r s e t h e f i n d i n g t h a t a l l b u s i n e s s t r a n s a c t i o n s , i n c l u d i n g t h e Diablo Mobile Repair b u s i n e s s , were s e t t l e d by t h e agreement. W e remand t o t h e D i s t r i c t Court t o conduct f u r t h e r proceedings t o determine t h e v a l i d i t y of a p p e l l a n t ' s counterclaim. W e concur: /