Opinion ID: 1411564
Heading Depth: 1
Heading Rank: 2

Heading: Exclusion of Parol Evidence

Text: Hawaii National contends that the trial court erred in excluding testimony by George Akamine as to the debts he intended the September 26 mortgage to cover. The trial court rejected its contention that the parol evidence rule is inapplicable where the evidence is offered by a stranger to the instrument. We agree. We are mindful of statements in many opinions, e.g., In re Shield Bros., 134 Iowa 559, 111 N.W. 963 (1907), that: As against a stranger to the contract, a party thereto may assert that the agreement was other or different  in any respect and to any extent  than that which the writing imports. Supra at 562, 111 N.W. at 963. At least one treatise adopts this approach. [2] But with rare exceptions, the cases do little more than state that this is a fundamental doctrine. Livingston v. Stevens, 122 Iowa 62, 67, 94 N.W. 925, 926 (1903). The only case Hawaii National cites which contains even a general statement of reasons is Bruce v. John L. Roper Lumber Co., 87 Va. 381, 13 S.E. 153 (1891). The opinion quotes from 1 Greenleaf, Evidence § 279 to the effect that strangers might be prejudiced by things recited in the writings contrary to the truth, through the ignorance, carelessness, or fraud of the parties.... Quoted supra at 383, 13 S.E. at 153. Furthermore, most cases in which the exception in favor of strangers is invoked involve situations in which parties to the instrument could have introduced parol evidence under one of the well-recognized exceptions to the parol evidence rule. An examination of the purpose and nature of the parol evidence rule requires us to apply it in any case where the issue involved is what rights or duties were created by the instrument. 3 Corbin, Contracts 572-78 (Rev'd. 1960); 9 Wigmore, Evidence 149-51 (3d ed. 1940); 4 Williston, Contracts 1154-67 (3d ed. 1961). The parol evidence rule is a principle of substantive law and not a rule of evidence, Midkiff v. Castle & Cooke, Inc., 45 Haw. 409, 422, 368 P.2d 887, 894 (1962). As a rule of substantive law, it determines the parties' legally enforceable contractual obligations. It must be remembered that the written contract represents the truth and the whole truth [as a matter of substantive law] of the contractual obligations of A and B in whatever way and between whatever parties an inquiry as to such obligations may become important. 4 Williston, supra at 1163. Once the parties execute an instrument which contains their whole agreement, their previous negotiations and agreements are legally ineffective and evidence relating to those previous negotiations or agreements is irrelevant regardless of who offers it. The alleged prejudice which might occur may be prevented by introduction of parol evidence by the stranger under any of the numerous exceptions to the parol evidence rule. A stranger could introduce parol evidence to prove that the written agreement is fraudulent as to him. In Chang v. Meagher, 40 Haw. 96 (1953), the defendant was a joint venturer under an agreement which stated that the joint venture began operation on August 1. The plaintiff was permitted to introduce parol evidence to establish that the joint venture had been operating before that time and the services the plaintiff performed in July, ostensibly for the other member of the joint venture as an individual, were rendered for the joint venture. Although the court stated the broad principle that the parol evidence rule does not apply to strangers to the instrument, we think that the decision is more soundly based on the right of a party or stranger to the instrument to show that the instrument is fraudulent. The main issue in this case was the precise nature of the obligations secured by the mortgage, that is the relations between American Security and Akamine & Sons, Ltd. The mortgage is the integrated document containing their entire agreement and parol evidence could not be introduced merely because Hawaii National was not a party to the mortgage. Hawaii National contends that it was entitled to have George Akamine's testimony introduced under either of two well-recognized exceptions to the parol evidence rule: to prove the real consideration for the mortgage, and to prove fraud. Hawaii National's attempt to connect the issue of consideration with the debts intended to be covered is ingenious but ineffective. It does not contend that the mortgage failed for lack of consideration or that the stated consideration was not given by American Security. Even if the question of consideration were in issue, the parol evidence, in the form of George Akamine's testimony, did not relate to this issue and therefore was properly excluded. Finally, even were we to construe Hawaii National's allegation in its amended petition to intervene as an allegation of fraud, the offer of proof failed to support the allegation. [3] On cross-examination, George Akamine conceded that he had no role in negotiating the mortgage. Such testimony was completely worthless on the issue of fraud.