SPRAGGINS v ELVIDGE
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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: Decided : Filed: PPR ! 4g87' Clerk October 23, 1980 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 Livingston, Inc., from George A. and Donna F. Moore. of 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 r e s p o n d e n t had i n t h e s h a r e s o f s t o c k o f t h e M i n t Bar was c o m p l e t e l y s e t t l e d . Appellant paid respondent $15,000 on September 5, 1 9 7 8 , and e x e c u t e d a p r o m i s s o r y n o t e f o r $ 1 0 , 0 0 0 p a y a b l e t o r e s p o n d e n t f o r t h e r e m a i n i n g amount. A p p e l l a n t f a i l e d t o pay t h e $ 1 0 , 0 0 0 p r o m i s s o r y n o t e when d u e , and r e s p o n d e n t commenced t h i s a c t i o n . Appellant c o u n t e r c l a i m e d f o r m o n i e s d u e and owing him from t h e s a l e o f the California business as a setoff f o r t h e amount d u e t o r e s p o n d e n t on t h e p r o m i s s o r y n o t e . The D i s t r i c t claim for Court collection of found the in favor promissory of respondent's note and against a p p e l l a n t on h i s c l a i m o f s e t o f f a s a r e s u l t o f t h e s a l e o f the California business. Appellant between the respondent's agreement contends parties interest and the that the only written pertains to the i n t h e Mint Bar. release executed agreement termination of The a s s i g n m e n t o f by the parties 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 b e g i v e n by a p p e l l a n t t o r e s p o n d e n t i s $25,000. Nowhere i n e i t h e r o f t h e s e d o c u m e n t s i s t h e r e any m e n t i o n o f t h e D i a b l o M o b i l e R e p a i r o r t h e sums d u e and owing from r e s p o n d e n t t o a p p e l l a n t a s a c o n s e q u e n c e of the s a l e thereof. allowed contract respondent by consideration adding paid Appellant argues t h e D i s t r i c t Court to alter the approximately (appellant's terms of $15,000 alleged the as one written the half p r o c e e d s from t h e s a l e of D i a b l o Mobile R e p a i r ) . The D i s t r i c t C o u r t made t h e f o l l o w i n g f i n d i n g : "That Rule 106 o f t h e Montana R u l e s o f Evidence a p p l i e s a s t o t h e admission of evidence by Plaintiff to Defendant'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 total of the 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 o f the fact in dispute. t h e agreement is " ( 2 ) But t h i s s e c t i o n d o e s n o t e x c l u d e o t h e r e v i d e n c e o f t h e c i r c u m s t a n c e s u n d e r which t h e a g r e e m e n t was made o r t o w h i c h i t 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 a n ext 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 fraud. " ( 3 ) The t e r m a g r e e m e n t i n c l u d e s d e e d s 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 the proper construction of an 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 u n d e r which i t 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 o f 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 i t , may a l s o be shown s o t h a t t h e j u d g e 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 l a n g u a g e h e is t o i n t e r p r e t . " None of the parol s e c t i o n 72-11-304, MCA, evidence exceptions contained apply here. Respondent in never 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 assailed 28-2-904, MCA, the validity is c o n t r o l l i n g . of the contract. Section When t h e c o n t r a c t i s c l e a r and u n e q u i v o c a l on i t s f a c e , s e c t i o n 1-4-102, MCA, does not ( 1 9 6 5 ) , 1 4 6 Mont. 299, 406 P.2d apply. 373. Ryan v. We Ald, Inc. have h e r e a w r i t t e n contract. s i g n e d by a p p e l l a n t and r e s p o n d e n t . c l e a r on i t s f a c e . the Mint Bar. The It The c o n t r a c t is The w r i t t e n c o n t r a c t i s s p e a k s d i r e c t l y and e x c l u s i v e l y o f "oral" agreement which preceded the 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 o f general application, subject t o certain when a c o n t- -c t h a s b e e n r- aexceptions, that r e d u c e d t o w r i t i n q -------------------c h t h e c o n t e n t s of su ----------------w re added t o , c o n -i t i n g c a n n o t b ---------------- t r a d i c t e d , altered, or varie o l- r .................... d b y p a r - o- e x t r i n s i c e v i d e n c e , and t h a t s u c h 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 matter w h i c h p r e c e d e d , a c c o m p a n i e d , o r l e d up t o i t s execution. T h i s was t h e r u l e a t common l a w , and h a s been embodied i n t h e s t a t u t e law o f L e i g l a n d v . McGaff i c k ( 1 9 5 9 ) , t h i s state." 1 3 5 Mont. 1 8 8 , 338 P.2d 1 0 3 7 . R u l e 1 0 6 , Mont.R.Evid., provides i n pertinent part: " ( a ) When p a r t o f a n a c t , d e c l a r a t i o n , conversation, writing or recorded statement o r s e r i e s t h e r e o f i s i n t r o d u c e d by a p a r t y : (1) a n 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 o f s u c h i t e m o r s e r i e s t h e r e o f which o u g h t i n f a i r n e s s t o (Emphasis be considered a t t h a t t i m e ; supplied ) . . ." . 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 C o u r t r e l i e d on R u l e 1 0 6 i n m o d i f y i n g and v a r y i n g t h e terms of a w r i t t e n agreement. of Rule 106. S u c h was n e v e r t h e i n t e n t R u l e 106 o f t h e F e d e r a l R u l e s o f P r o c e d u r e 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 advisory committee's note, considerations: (1) t h e t h e f e d e r a l r u l e is b a s e d o n two danger of taking matters out of c o n t e x t , and ( 2 ) t h e i n a d e q u a c y o f d e l a y e d c o m p l e t e n e s s 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 P r o c e d u r e : E v i d e n c e , S 5007 a t 367. No o n e i n t r o d u c e d p a r t o f a n a c t o r w r i t i n g i n t h i s case. Respondent i n t r o d u c e d a l l of t h e buy o u t o f t h e w r i t i n g s governing t h e M i n t Bar o p e r a t i o n . All of t h e terms s u r r o u n d i n g 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 r e s p o n d e n t f o r the surrendering of his interest in the Mint Bar were o f f e r e d and r e c e i v e d i n e v i d e n c e . W e addressed a similar issue in State Highway Commission v . C h u r c h w e l l ( 1 9 6 5 ) , 1 4 6 Mont. 5 2 , 403 P.2d 751, where t h e p a r t i e s w e r e c o n t e s t i n g a j u r y award o f t h e t a k i n g of land by condemnation. The p a r t i e s w e r e a r g u i n g a b o u t t h e f a i r m a r k e t v a l u e o f t h e l a n d t h a t was t a k e n . the trial, to establish the value of the property, At the landowners o f f e r e d f i n a l agreements of s a l e f o r land i n t h e v i c i n i t y of t h e l a n d i n q u e s t i o n t o d e m o n s t r a t e t h e v a l u e o f t h e i r land. The S t a t e t h e n , o v e r o b j e c t i o n , was a l l o w e d 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 the various sales. The S t a t e a r g u e d 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 u n d e r s e c t i o n 93-401-11, 1947. R.C.M. T h a t 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 R u l e 1 0 6 , Mont .R. E v i d . , and r e a d : "When part of an act, declaration, 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 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 detached act, declaration, conversation, or writing is given i n evidence, any other act, declaration, c o n v e r s a t i o n o r w r i t i n g , which i s n e c e s s a r y t o make it u n d e r s t o o d , may a l s o be g i v e n i n evidence " . We rejected the State's argument i n Churchwell, stating: "'When a c o n t r a c t is r e d u c e d t o w r i t i n g , t h e i n t e n t i o n o f 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 o f t h i s chapter.' ( S e c t i o n 13-705.) "'When t h e t e r m s o f a n a g r e e m e n t h a v e been r e d u c e d 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 c o n s i d e r e d a s c o n t a i n i n g a l l t h o s e t e r m s , and t h e r e f o r e t h e r e c a n be between t h e parties and their representatives, or s u c c e s s o r s i n i n t e r e s t , no e v i d e n c e o f t h e terms of t h e agreement o t h e r than t h e c o n t e n t s of t h e w r i t i n g , except i n t h e following cases: 1 Where a m i s t a k e o r i m p e r f e c t i o n o f w r i t i n g i s p u t i n i s s u e by t h e p l e a d i n g s . the "'2. Where t h e v a l i d i t y o f t h e a g r e e m e n t is the fact in dispute. "'But t h i s s e c t i o n does not exclude other e v i d e n c e o f t h e c i r c u m s t a n c e s u n d e r which t h e a g r e e m e n t was made, o r t o which i t 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, or t o e x p l a i n an e x t r i n s i c ambiguity, or t o establish i l l e g a l i t y or fraud. The t e r m a g r e e m e n t i n c l u d e s d e e d s 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 o f t h e n e g o t i a t i o n a g r e e m e n t s 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 a g r e e m e n t s p e a k s f o r i t s e l f and t h a t s e c t i o n 1 9 4 7 , h a s no a p p l i c a t i o n . " 93-401-11, R.C.M. 403 P.2d a t 754-55. In the testimony instant to instrument. vary case and respondent alter the T h i s c a n n o t be d o n e . o t h e r w i s e would, offered terms of the a parol written For t h i s C o u r t t o h o l d i n e f f e c t , r o b t h e p a r o l e v i d e n c e r u l e and t h e c o r r e s p o n d i n g Montana s t a t u t e s o f a n y v i t a l i t y a t a l l . Rule 106 is a procedural rule and does not affect the s u b s t a n c e of t h e e x i s t i n g law o f p a r o l e v i d e n c e . W affirm in part the District Court's e appellant reverse is l i a b l e f o r the finding finding that t h e $10,000 p r o m i s s o r y n o t e . that all business We transactions, i n c l u d i n g t h e D i a b l o M o b i l e R e p a i r 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 C o u r t t o c o n d u c t f u r t h e r p r o c e e d i n g s t o d e t e r m i n e 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: /
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