Opinion ID: 2598301
Heading Depth: 3
Heading Rank: 2

Heading: Parol Evidence Ruling

Text: When a written statement sets out the terms of an agreement between contracting parties, the parol evidence rule generally precludes the parties from using evidence of prior agreements to contradict the written terms. [4] If the writing expresses part of the parties' agreement, the agreement is considered to be partially integrated; a writing that sets out the parties' complete agreement is deemed fully integrated. [5] The parol evidence rule forbids contradiction of partially integrated terms but allows them to be explained or supplemented ... by evidence of consistent additional terms. [6] In contrast, the rule does not allow the terms of a fully integrated contract to be varied by evidence of additional terms, even if those terms are consistent. [7] Our case law describes a three-step process for resolving parol evidence issues, requiring trial courts to consider: (1) whether the contract is integrated, (2) what the contract means, and (3) whether the prior agreement conflicts with the integrated agreement. [8] We have summarized the requisite inquiry as follows: The parol evidence rule is implicated when one party seeks to introduce extrinsic evidence which varies or contradicts an integrated contract. Once the rule is triggered, the parties' reasonable expectations are determined by applying a three-step test. The first step is to determine whether the contract is integrated. The second step is to determine what the contract means. Determining the meaning of a contract is treated as a question of law for the court except where there is conflicting extrinsic evidence on which resolution of the contract's meaning depends.... If the language is susceptible to [two] asserted meanings, then interpreting the contract is a question of fact for the jury. Extrinsic evidence may always be received in resolving these first two inquiries. The third step is to determine whether the prior agreement conflicts with the integrated writing. Whether there is conflicting extrinsic evidence depends on whether the prior agreement is inconsistent with the integration. Inconsistency is defined as the absence of reasonable harmony in terms of the language and respective obligations of the parties. ... While extrinsic evidence is important, nonetheless after the transaction has been shown in all its length and breadth, the words of an integrated agreement remain the most important evidence of intention. [9] In the present case, the superior court acknowledged the need to conduct this three-step inquiry and briefly addressed each step. But the court did not clearly recognize that it was required to consider the totality of the evidence, including extrinsic evidence of the renewal agreement, in addressing the first two issuesintegration and contractual meaning. The point is significant, since our cases have consistently emphasized that [e]xtrinsic evidence may always be received in resolving [the] first two inquiries. [10] Addressing the first issue, integration, the superior court simply quoted the charter agreement's integration clause and cited Kupka v. Morey for the proposition that contracts containing such clauses are partially integrated so that parol evidence may not be used to prove a provision that contradicts or is inconsistent with a specific term of the contract. [11] The court then turned to the issue of contractual meaning. Noting that time charter agreements are inherently fixed-period contracts and that the agreements at issue here expressly fixed the duration of the charters to the period of June 20... to July 20 each year, the court summarily ruled that [t]he meaning of this term is fairly clear from the language of the time charter, and Froines does not identify any ambiguity in this language. Turning to the third-step issue of conflict, the court, again appearing to rely exclusively on the plain meaning of the written charter agreements, concluded that Froines's allegation of a renewal agreement was inconsistent with the unambiguous terms of the time charter in that it contradicted the provision for the anticipated duration of the charter. [12] Since Froines has not challenged the validity of the charter agreements' integration clauses or alleged that those agreements do not accurately memorialize part of the parties' overall agreement, we agree with the trial court's reliance on Kupka v. Morey to establish that the integration clauses alone allowed the charter agreements to be treated as partially integrated contracts. [13] But the court's conclusion on this point did not eliminate the need to consider and weigh the totality of the evidence for purposes of determining the intended scope and meaning of the charter agreements in relation to the alleged renewal agreement. To the contrary, recognizing the charter agreements to be partial expressions of the parties' agreement made it crucial to determine the scope and meaning of the full agreement in light of all available evidenceincluding Froines's proposed evidence of a renewal agreement. As we indicated earlier, however, the superior court's second-step determination of contractual meaning focused narrowly and exclusively on the literal terms of the charter contracts' one-month duration provisions. The superior court saw no need to look further, noting that Froines does not identify any ambiguity in this language. This finding suggests a belief by the court that Froines's extrinsic evidence of a renewal agreement could not be considered without an initial showing of ambiguity in the written provisions. Yet we have expressly recognized that a trial court's duty to consider the totality of the evidence in resolving issues of integration and contractual meaning extends to all cases and requires no preliminary indication of ambiguity in the written agreement: In the past, this court has stated or implied that resort to extrinsic evidence can take place only after a preliminary finding of ambiguity. Thus, a court would review extrinsic evidence to make a preliminary finding of ambiguity and only then consider extrinsic evidence in construing the contract. A minority of this court has repeatedly criticized this two-tiered test as artificial and unduly cumbersome, noting that it offers no advantage over one which initially turns to extrinsic evidence for such light as it may shed on the reasonable expectations of the parties. We think this criticism is sound and hold, as we have intimated before, that a court in this jurisdiction may initially turn to extrinsic evidence in construing a contract. [14] Here, under the evidence before the superior court at the time of its ruling, the scope and meaning of the charter agreements were hotly disputed issues. The association denied formally adopting the alleged renewal policy and maintained that the charter agreements were fully integrated contracts that expressed the parties' complete agreement, ruling out any possibility of an enforceable renewal agreement. Froines, on the other hand, asserted that the association had all but admitted the renewal policy's existence. Portraying the charter agreements as contracts that were limited in subject and scope to governing the fleet's fishing activities during the cost-recovery season proper, Froines characterized the renewal policy as a supplemental contractual term that was consistent with the charter agreements because the renewal policy merely enabled the parties to determine how the fleet would be selected between each season of fishing. Generally, the interpretation of a writing is a task for the court. However, where `interpretation of a written instrument turns on the acceptance of extrinsic evidence, the process of weighing such evidence should be for the trier of fact.' [15] More specifically, we have explained that [w]hether there is conflicting extrinsic evidence is a question resolved by the court. Even where there is conflicting extrinsic evidence the court decides the question of meaning except where the written language, when read in context with its subject matter, is reasonably susceptible to both asserted meanings. If the language is susceptible to both asserted meanings, then interpreting the contract is a question of fact for the jury. Extrinsic evidence may always be received in resolving [this issue]. [16] Viewing the totality of the evidence in the present case in the light most favorable to Froines, we find extrinsic evidence that, if accepted, is reasonably susceptible to being viewed as proof of a renewal policy that would supplement, rather than contradict, the terms of the annual vessel charter agreements. In context, the alleged renewal policy could reasonably be seen as merely determining how the association would select candidates for its fleet from season to seasona subject beyond the narrower scope of the fixed-period charter agreements. So construed, the renewal policy would neither extend nor alter the terms of the annual charter agreements; it would simply promise those vessel owners who were invited to join the current year's fleet that, in return for a productive season of fishing under the current charter agreement, they would be invited back to fish with the fleet the following year under whatever terms the association might offer them assuming that the association elected to retain its fleet method of cost-recovery fishing. [17] Accordingly, the alleged renewal policy would not contradict the terms of the vessel charter agreements. [18] Because the alleged renewal policy is not inconsistent with the charter agreements, the parol evidence rule does not bar extrinsic evidence tending to prove the policy's adoption and continued existence. And because reasonable jurors viewing the evidence in the light most favorable to Froines could find that the association adopted and breached a policy of this kind, we conclude that entry of summary judgment for the association amounted to error. [19]