STERNES v. TUCKER et al, 239 Or. 105

DENECKE, J. Buyer Sternes sued real estate broker Tucker and seller O’Bryant for $5,000 earnest money previously paid Tucker. The jury found for the plaintiff; however, the court granted judgment n.o.v. for the defendants. The principal issue is whether plaintiff’s obligation was subject to an oral condition which had not been fulfilled.

The complaint alleges that the earnest money agreement was “subject to, and conditioned thereon, however, upon plaintiff’s father loaning plaintiff the money for the down payment of $20,000 to be made in addition to said deposit.” In the spring of 1958 -the parties commenced negotiations for the purchase of a farm. In June plaintiff Sternes told defendant Tucker that he needed outside financing to buy the farm and that any sale would have to be contingent upon getting 'the money from his father.

About July tenth, Sternes told Tucker that “his father was the key-man in this particular deal because he would be the one that was furnishing the financing.” On July twelfth, Sternes made the following written offer: “I will purchase said ranch for a total purchase price of $65,000.00 payable $25,000.00 down and the balance payable at $5,000.00 a year with interest at 5%. The balance to be represented by a note and first deed of trust upon the property.

It is understood that I will receive a marketable title to said property and that title will be passed by a warranty deed. “This offer is made upon condition that prior to the closing of this transaction I am able to find a person interested in leasing said property and who does lease said property for a period of from 3-5 years at an annual cash rental of $6,000.00 or more payable in advance, the first payment under said lease to be made concurrent with the closing of this transaction so 'that $5,000.00 of said rental can be applied to the down payment on said property.

Said lease is to contain the ordinary provisions included in leases in the immediate area and shall provide that lessor is to pay taxes. “At such time as this offer is accepted I will forward the sum of $5,000.00 to be held in your trust account pending the closing of this transaction. Prior to the closing of the transaction an additional $15,000.00 will be forwarded which sum with the cash rent on said lease will be handled as the down payment on said property.

Should it be impossible to find a lessee who will lease on the above terms my $5,000.00 deposit will be returned to me upon demand or I will be permitted at my option to raise the full $20,000.00 balance on the down payment from other sources. This offer is to be in effect until September 1, 1958 but should a lessee not be found by that date I will have an additional 30 days to raise the balance.” Tucker accepted this offer and thereupon Sternes sent, and Tucker received, a check, dated July eighteenth, for $5,000. By letter dated September 2, 1958, Tucker sent an earnest money receipt for Sternes’ signature.

He informed Sternes that he had a $500 rental deposit on a $5,000-a-year lease. By letter dated September 4,1958, Sternes returned the earnest money receipt with his signature.

He had added to the terms of the receipt the following: “Agreement is conditional upon broker having a signed lease for 5 years at an annual rental of $5,000.00 effective on date of purchase.” In his letter of transmittal he stated: “* # * You appreciate that I am not in a position to purchase the property without such a lease in existence. “At such time as you have in your hands an executed and effective lease for the leasing of said property for five years at a rental of $5,000.00 per year, effective upon my purchase of said property, you are authorized to deliver my acceptance of the offer to sell and to close the transaction.” Concerning the letter of transmittal and the condition added to the earnest money receipt, Sternes' testified: “Well, I had this letter prepared by my attorney in Marysville, knowing that I was getting the money from my father, and there was no reason not to sign ■ the earnest money receipt, so I signed the receipt and mailed it, along with 'this letter, back to Mr.

Tucker, and I sent all the papers with the earnest money receipt back. That was September áth. I took the earnest money receipt to my lawyer and he typed in the conditions of the lease in the earnest money receipt * * When asked why he would not put up earnest money earlier, Sternes testified: “A * * * I wanted to go home and talk to my father and make sure he was going to loan me the money. “Q And that was your reason for not putting down the earnest money at that time ? “A That was one reason. The other reason, I wanted^ to think it oyer a little bit more.

Talk it over with Jim on the road home to see what he thought of the place. To give us a little more time to talk it over. Discuss it. “Q And your father, then, I take it, later did agree to do this financing? “A Yes, he did. “Q And after that you made the negotiations that wound up in the earnest money agreement that’s on record here now? “A That’s correct. “Q And at the time that that earnest money agreement was signed by you, your father then was agreeable to financing the down payment? “A That’s correct.” Plaintiff further testified: “Q When you sent the earnest money receipt back to Mr.

Tucker on or about September 4th, then you intended that that be a binding agreement for you to buy and the other people to sell, did you not? “A Yes, at that time. “Q You expected, then, the people to proceed with whatever was necessary to close that agreement? “A Yes.” The jury was instructed that if it found that the earnest money agreement was conditioned upon the plaintiff’s father loaning plaintiff $20,000, plaintiff was entitled to a verdict.

The defendants contend that the parol evidence rule prohibits the consideration of any evidence of the terms of the parties’ agreement except those contained in the earnest money agreement itself. The plaintiff attempts to rebut this proposition by asserting that it can always he shown that a written agreement was subject to an oral condition. Oregon’s parol evidence rule is codified in OB.S 41.740. We have repeatedly held, however, that the parol evidence rule does not prevent the consideration of evidence that 'the parties orally agreed that the obligation assumed by the writing was subject to a condition.

Degraw v. Grindrod, 189 Or 684, 222 P2d 649 (1950), and cases cited therein. This appears to he the rule in most jurisdictions. 3 Corbin, Contracts (1960), 530, §589. The above-stated exception to the parol evidence rule is also subject to limitation. That limitation is that evidence of a condition not stated in the writing will not be considered if it is determined that the parties intended the writing to contain their entire agreement, i.e., the parties “made an integration of the agreement.” Dorsey v. Tisby, 192 Or 168, 179, 234 P2d 557, 563 (1951).

This limitation has an obvious common-sense basis; if the parties intend that all the terms of their agreement be as expressed in the writing, any other term would be contrary to the intention of the parties. Dorsey v. Tisby, supra (192 Or at 179, 234 P2d at 563), states: “* * * The first duty exacted by the rule of a judicial officer is to search through the evidence and ascertain whether or not the parties made an integration of the agreement. If he finds that they did not, the rule has no application and may be cast aside.

But if 'they made an integration, all of their previous negotiations, whether written or oral, must be disregarded as evidence of the contract. The integration thereupon is deemed the sole evidence of their agreement, except, of course, for matter which it may have set forth in recital form, as, for example, the receipt of a given sum as consideration. The parol evidence rule protects the integration, but nothing else.

It protects it by disregarding the preliminary negotiations as evidence of the agreement and by looking solely to the integration.” 3 Corbin, Contracts, 368, § 573, states: “All the cases may indeed be accepted as precedents for the proposition that if the parties have stated the terms of their contract in the form of a complete written integration, it cannot be varied or contradicted by proof of antecedent negotiations and agreements. This is a mere statement of the obvious. * # This court in Dorsey v.

Tisby, supra, held that the writing was a complete integration of the agreement and, therefore, no other terms or conditions could be considered. An earnest money receipt contemplates a subsequent conveyance or land sale contract with provisions or terms not contained in the earnest money receipt. In that sense it is not an integration of the entire agreement. However, it is not the type of instrument that contemplates any subsequent writing upon the subject of when and if the parties’ obligations to buy and sell become effective.

All the evidence, particularly the testimony of the plaintiff himself, is that the earnest money receipt contained the complete agreement of the parties on the subject of the conditions to be fulfilled in order that the agreement be effective. Plaintiff’s testimony is to the effect that the agreement did not contain a condition that it was subject to his obtaining financing from his father 'because when the plaintiff executed the agreement his father had promised him financing and the plaintiff would not sign the agreement until he was sure his father would finance him.

At the time the receipt was signed the only condition that plaintiff wanted in the instrument was that a binding five-year lease, for $5,000 per year be obtained. Plaintiff was asked whether this condition concerning the five-year lease was the only condition at that time and the plaintiff answered as follows: “A The only condition? This was one of the conditions that was down here, but Mr.

Tucker also knew I was getting outside financing. “Q But you had already ascertained from your father that you could get 'the financing at this time? “A Yes, I could. “Q >So that condition had been complied with, then, had it not? “A At that time. That’s why I took this to my lawyer in Marysville, and he knew my father was going to loan me the money and he saw no reason for not signing.” There is no indication that the plaintiff intended to condition his obligation upon his father’s fulfilling his promise to finance. The plaintiff’s attorney knew the financing circumstances.

The attorney too, according to plaintiff, saw no need to condition the agreement upon the father’s fulfilling his promise to finance. All the evidence was that the earnest money receipt was intended by the parties to contain the complete agreement and, therefore, the trial court was correct in granting judgment for the defendants. This was the principal issue in the appeal and the remaining assignments of error require little discussion. Plaintiff contends the trial court erred in granting defendants’ motion to strike the affirmative allegations in his reply.

Defendants, in their answer, denied plaintiff’s allegation that the earnest money agreement was conditioned upon plaintiff’s father furnishing the financing and affirmatively alleged that defendants had performed everything they were to then perform; however, plaintiff refused to perform. Plaintiff affirmatively alleged in Ms reply, in effect, that the agreement was not binding because of Tucker’s breach of his fiduciary duties to plaintiff. These allegations the trial court correctly struck.

The complaint was on the theory that there was á. valid written agreement which was subject to an oral condition which had not been fulfilled. The reply attempted to place plaintiff’s right to the return of the money on a different basis. This is not proper in the reply. Tracy and Baker v. City of Astoria, 193 Or 118, 131, 237 P2d 954, 960 (1951). Plaintiff also assigns as error the trial court’s denial of his motion, made after all the evidence had been received, to amend his complaint to allege that no agreement had been consummated because the seller O’Bryant had never accepted plaintiff’s offer.

This is a different basis for relief than that previously alleged and the trial court ruled in accordance with OBS 16.390. The trial court’s failure to submit to the jury the issues of whether O’Bryant could convey marketable title and whether a sufficient lease was obtained is also asserted to be error. The evidence is that the transaction was not closed because Sternes’ father changed his mind. Plaintiff never gave notice of any claimed defects in the title, as the agreement required. If he had, the evidence is that any possible defects could have been corrected within the time specified in the agreement.

Plaintiff’s contention that the lease was insufficient is without merit. Affirmed. “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 termá of the agreement, other than the contents of the writing, except where a mistake or imperfection of the writing is put in issue by the pleadings or where the validity of the agreement is the fact in dispute. However this

section does not exclude other evidence of the circumstances under which the agreement was made, or to which it relates, as defined in ORS 42.220, or to explain an ambiguity, intrinsic or extrinsic, or to establish illegality or fraud. The term ‘agreement’ includes deeds and wills as well as contracts between parties.”