Case Name: CALDWELL et ux v. WELLS
Court: Oregon Supreme Court
Jurisdiction: Oregon
Decision Date: 1961-10-18
Citations: 228 Or. 389
Docket Number: 
Parties: CALDWELL et ux v. WELLS
Judges: Before McAllister, Chief Justice, and Rossman, Warner, Perry, Sloan, O’Connell and Goodwin, Justices.
Reporter: Oregon Reports
Volume: 228
Pages: 389–404

Head Matter:
Argued May 2,
affirmed October 18, 1961
CALDWELL et ux v. WELLS
365 P. 2d 505
Joe French, Pendleton, argued the cause for appellant. On the brief were Currin and French, Pendleton.
Harold A. Fabr'e, Pendleton, argued the cause for respondents. On the brief were Fabre, Collins & Kottkarnp, Pendleton.
Before McAllister, Chief Justice, and Rossman, Warner, Perry, Sloan, O’Connell and Goodwin, Justices.

Opinion:
O'CONNELL, J.
This is an action in which plaintiffs seek damages for an alleged breach of contract. On March 20, 1959, plaintiffs entered into- .a contract with defendant to purchase a house and lot. The contract was memorialized in a Steven-Ness "Earnest Money Receipt" form consisting'of one page.' Pursuant to this contract defendant and his wife executed, a warranty deed to plaintiffs on April 8,1959. The complaint alleges that, as a part of the transaction, "defendant agreed to drill a well on said property so as to furnish plaintiffs with a satisfactory supply of water for domestic use" and that defendant breached this contract. The alleged agreement was not made a part of 'the contract or deed.
The trial court entered findings of fact consistent with the allegations in plaintiffs' complaint. The trial court concluded that defendant breached the contract in that the water from the well was muddy; that the well did not furnish a satisfactory supply of water for domestic purposes; and that the well caved in because it was not properly cased. The trial court entered judgment for plaintiffs in the amount of $1,443.37. Defendant appeals. The issue on appeal is whether there is any evidence to support the findings of fact.
Plaintiff Charles Caldwell was the sole witness in the case. He testified that prior to the execution of the contract he went upon the land with defendant, at which time he inquired about the well and the supply of water. Defendant stated that it was a "good well." Caldwell testified that he asked defendant whether the well "would supply sufficient water for the property or not" and the defendant "said it would produce twelve to fourteen gallons per minute, and that was sufficient enough to supply what water we needed for household use plus irrigating the lawn." Caldwell further testified as follows:
"Q "Who agreed to — what was the agreement so far as equipping the well with a pump?
"A Mr. Wells said that he would have the pump installed and it would be all hooked up ready for use.
"Q By hooking it up, what had to be done in order to hook it np?
"A The well-house had to be dug, foundation built, the pump had to be installed and the line laid from the pump to the house to connect into the plumbing in the house.
"Q Mr. Wells agreed to do all that?
"A Yes sir."
Defendant built the well house and installed the pump but the well did not produce water suitable for domestic use. When plaintiffs took possession of the property the water from the well contained sediment rendering it cloudy and murky. Eventually the pump failed to raise any water from the well, Whereupon plaintiffs had the well repaired. Prom the time when plaintiffs took possession until the well was repaired it did not supply water suitable for household use.
Defendant contends (1) plaintiffs must rest their case on an implied warranty of quality and that such a warranty is not recognized in the sale of real property; (2) that the oral agreement relied upon by plaintiffs is unenforceable because it is within the Statute of Frauds; (3) that the evidence of the oral ¡agreement is inadmissible under the parol evidence rule; (4) that the deed merged the previous agreement, and (5) that a warranty is not enforceable if it does not appear in the deed. The last point will be treated first.
Defendant relies upon Steiber v. Palumbo et al, 219 Or 479, 347 P2d 978 (1959), which holds that the law will not imply a warranty of quality in the sale of real property. In that case the purchaser sought to recover on the theory that in the sale of a house and lot the seller impliedly warrants that the house, including the foundation, is of substantial and. sturdy construction. There was no express promise with respect to the quality of the structure and the law is clear that a warranty of quality will not be implied in the sale of real property. But the rule rejecting implied warranties in the sale of real property is not applicable to the case at bar. The promise which plaintiffs seek to enforce in this action was defendant's promise to install a well for plaintiffs' domestic use. Admittedly, the defendant's promise to furnish a usalble well was a part of the transaction which culminated in the transfer of the title to real property and it is reasonable to assume that without that promise the plaintiffs would not have purchased the property. But the concession that the defendant's promise was a part of the bargain for the transfer of title does not establish the proposition that his obligation rests upon an implied warranty of quality. The asserted obligation can be found in defendant's promise rather than in an implied warranty created by law. The evidence is sufficient to establish that the defendant's promise was not simply a promise to furnish a well, but that it was broad enough to include the obligation to furnish a well which would produce water adequate for plaintiffs' domestic use. The defendant's promise to furnish a well, taken alone, would not, of course, create a promissory obligation to put into operation a well which would furnish water suitable for plaintiffs' use. But the promise to put in the well-house and pump cannot be isolated from the negotiations which led up to the final execution of the contract for the purchase of the property. Those negotiations reveal that plaintiffs were bargaining not only for a house and a parcel of land — they wanted a supply of water adequate for their needs. The statement máde by defendant prior to the execution of the contract to the effect that the well was a "good well" and that it was sufficient'to supply plaintiffs' domestic néeds,' gives color to defendant's later promise to install the well equipment.. We regard this later promise as a promise to supply well water suitable for plaintiffs' domestic use. Whether we describe the'promise as express or implied in fact is immaterial; under either construction the liability arises out of a promise and not out of a law-created implied warranty of quality.
The express or implied in fact promise created a contract separate from, although collateral to, the contract for the sale of the land. Cases involving construction contracts accompanying the sale of land are in point. See Becker v. Lagerquist Brothers, Inc., 55 Wash2d 425, 348 P2d 423 (1960). See also, footnote 2 in the margin.
It follows that the rule precluding the implication of warranties of quality in sales of real property is not applicable to the present case. Therefore, Steiber v. Palumbo, supra, relied upon by defendant is not in point.
It is next asserted by defendant that the parol evidence rule is applicable to exclude the evidence of the oral agreement entered into in this case. It cannot be denied that there are a substantial number of cases in which the courts have held that oral promises and warranties are not admissible under the parol evidence rule. See for example the cases cited in 3 Corbin, Contracts, §585 (1960); 3 Williston, Contracts (rev ed 1936) § 643. But many, if not most of these cases are not correctly decided and 'they need not embarrass us in reaching a sound conclusion upon the basis of the correct 'application of the parol evidence rule. The parol evidence rule is described as a rule of integration. 9 Wigmore on Evidence (3rd ed 1940) §2425; McCormick on Evidence (1954), § 213. The rule closes the door to proof only as to those aspects of the bargain which the parties intended to memorialize in the writing. 3 Williston, Contracts (rev ed 1936) § 633. The rule is correctly stated in 1 Restatement, Contracts § 240 (1932):
"(1) An oral agreement is not superseded or invalidated by a subsequent or contemporaneous integration, nor a written agreement by a subsequent integration relating to the same subject-matter, if the agreement is not inconsistent with the integrated contract, and
"(a) is made for separate consideration, or
"(b) is such an agreement as might naturally be made as a separate agreement by parties situated as were the parties to the written contract."
Whether the parties intended to integrate their agreement in the writing is a question of fact in each case.
In the case at bar we must determine whether the-agreement to furnish a well'"is such an agreement as might naturally be made as a separate agreement by parties situated as were the parties to the written contract." 1 Restatement, Contracts § 240, supra. The written contract which defendant contends is controlling was an earnest money agreement. It is common knowledge that such a writing purports only to seal the bargain -in a rough form and that the parties do not normally include all of the refinements of the transaction in an earnest money agreement. It would seem natural for the parties to omit from- an earnest money agreement such an incidental promise as that which defendant made in this -case. Therefore, the trial court correctly admitted the evidence of the promise. Becker v. Lagerquist Brothers, Inc., 55 Wash2d 425, 348 P2d 423 (1960).
Defendant raises the Statute -of Frauds as a defense. The agreement relied upon by plaintiffs in the ease at bar was not within the Statute of Frauds. The defendant agreed to furnish a well suitable for plaintiffs' use. This is not an agreement involving the transfer of real property; rather it is an agreement calling for defendant's services. The fact that the services are to be performed on the land and that the result bargained for relates to the use of the land does not bring the agreement within the Statute of Frauds. The use of the land is merely incidental to the performance of the promise. See Byers v. Locke, 93 Cal 493, 29 P 119 (1892); Frear v. Hardenbergh, 5 Johnson 272 (NY 1810); Carter v. McCall, 193 S C 456, 8 SE2d 844, 151 ALR 641 (1940). Cf., 5 Restatement, Property, Servitudes, Scope note Part III, p. 3150 (1944).
It is argued that the acceptance of the deed merges all prior agreements imposing obligations upon the vendor. The law does not so operate. The deed operates as a merger only to the extent that it is intended to constitute a final memorial of the previous transaction. The rule is correctly stated in Johnston v. Lindsay, 206 Or 243, 248, 292 P2d 495 (1956):
" Covenants deemed to be collateral and dependent, it is said, are not destroyed by the execution of the deed, but a covenant is not so regarded if it looks to or is connected with the title, possession, quantity or emblements of the land which is the subject of the contract. In the case of a covenant regarding those matters the execution of the deed in pursuance of the contract will operate as an extinguishment of it. [citing cases]."
See also, Van Hee v. Rickman et al, 109 Or 357, 220 P 143 (1923).
The judgment of the lower court is affirmed.
Some of the cases involving building contracts are decided upon the theory of an implied warranty that the contractor will build the structure without material defects and that it will be suitable for the purpose for which it was constructed. Hoye v. Century Builders, 52 Wash2d 830, 329 P2d 474 (1958); Miller v. Cannon Hill Estates, Ltd. [1931] 2 K B 113; Bearman, Caveat Emptor in Sales of Realty — Recent Assaults Upon the Rule, 14 Vand L Rev 541 (1961); Dunham, Vendor's Obligation as to Fitness of Land for a Particular Purpose, 37 Minn L Rev 108 (1953); Comment, 5 DePaul L Rev 263 (1956); Note, 18 Md L Rev 332 (1958); Note, 34 Wash L Rev 171 (1959). The analogy to the implied warranty of quality in the sale of goods is suggested. Farnsworth, Implied Warranties of Quality in Non-sales Cases, 57 Columbia L Rev 653, 660 (1957); Prosser, The Implied Warranty of Merchantable Quality, 27 Minn L Rev 117, 152 (1943).
Inasmuch as we have rested the case at bar on the ground that a promissory obligation was created, it is not necessary for us to decide whether the defendant's collateral promise to furnish a well would give rise to an implied warranty to produce a well suitable for the purpose for which it was constructed.
Courts experience little difficulty in admitting evidence of written agreements collateral to a deed. Re v. Magness Construction Co., 49 Del 377, 117 A2d 78 (1955); Russ v. Lakeview Development, 133 NYS2d 641 (City Ct. 1954). Evidence of a collateral oral contract has been admitted on the same reasoning. Laurel Realty Co. v. Himelfarb, 191 Md 462, 62 A2d 263 (1948); Stevens v. Milestone, 190 Md 61, 57 A2d 292 (1948). See Bearman, Caveat Emptor in Sales of Realty — Recent Assaults Upon the Rule, 14 Vand L Rev 541, 548 (1961).