Opinion ID: 883921
Heading Depth: 1
Heading Rank: 4

Heading: Did the District Court err in instructing the jury on parol evidence when Savik and Piippo sought recovery under a theory of fraudulent inducement?

Text: The standard of review of a district court's conclusions of law is whether the court's interpretation of the law is correct. Carbon County v. Union Reserve Coal Co. (1995), 271 Mont. 459, 469, 898 P.2d 680, 686. A district court has broad discretion in instructing the jury and we will not reverse the court on the basis of alleged instructional errors absent an abuse of discretion. Werre v. David (1996), 275 Mont. 376, 391-93, 913 P.2d 625, 635. Further, when we examine whether jury instructions were properly given or refused, we consider the challenged instructions in their entirety, the evidence at trial and other instructions given by the court. Cechovic v. Hardin & Associates, Inc. (1995), 273 Mont. 104, 116, 902 P.2d 520, 527. When a party alleges fraud in the inducement, it is incumbent upon the district court to admit parol evidence on the question. Dew v. Dower (1993), 258 Mont. 114, 120, 852 P.2d 549, 552; Dodds v. Gibson Products Company of Western Montana (1979), 181 Mont. 373, 377, 593 P.2d 1022, 1024. For a jury to adequately consider a party's claim of fraudulent inducement, it is critical that it consider evidence outside of the written agreement as such evidence goes to the heart of the claim. In the instant case, the District Court gave the following jury instructions over Savik and Piippo's objection: [No. 8] The execution of a contract in writing, whether the law requires it to be or not, supersedes all the oral negotiations or stipulations concerning its matter which preceded or accompanied the execution of the instrument. [No. 10] A contract is to be construed according to the intention of the parties at the time of contracting. If the contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible. These instructions were given to the jury despite the fact that Savik and Piippo's contract claim had been dismissed and, thereafter, they were advancing only a claim of fraud in the inducement. In effect, these instructions kept the jury from considering the evidence Savik and Piippo brought forward in support of their claim of fraudulent inducement. When fraud is alleged, parol evidence may be considered by the jury. Section 28-2-905(2) MCA. See also Flemmer v. Ming (1980), 190 Mont. 403, 621 P.2d 1038. Limiting a jury's consideration of evidence to a written agreement creates an illogical requirement that an alleged fraud leading to the creation of the contract be demonstrated by a writing. Webcor Electronics v. Home Electronics (1988), 231 Mont. 377, 382, 754 P.2d 491, 494. This Court has previously held that, notwithstanding the parol evidence rule, fraud in the inducement is provable by parol evidence. Dew, 852 P.2d at 552; Dodds, Mersy v. Gibson Products Co. (1979), 181 Mont. 373, 377, 593 P.2d 1022, 1024; Goggans v. Winkley (1970), 154 Mont. 451, 459, 465 P.2d 326, 330. In the instant case, the District Court's instructions regarding parol evidence effectively precluded the jury from considering pre-contract conversations between Meldahl and Savik and Piippo. Since Savik and Piippo's claim of fraud in the inducement was based on pre-contract representations by Meldahl, the communications between Savik and Piippo and Meldahl were crucial to the jury's consideration. Having reviewed the jury instructions in their entirety, we hold that the challenged instructions effectively precluded the jury from considering communications between the parties outside of the written agreement. Evidence of communication between the parties was crucial to Savik and Piippo's claims of fraudulent inducement. We hold that the District Court abused its discretion by instructing the jury not to consider parol evidence in a claim of fraudulent inducement. Accordingly, we affirm in part, reverse in part and remand for a new trial on the issue of fraudulent inducement. HUNT, NELSON, TRIEWEILER and ERDMANN, JJ., concur.