Continental Oil Co. v. Bell , 94 Mont. 123 ( 1933 )

I agree with the result, but do not agree that it was error to receive evidence of the parol agreement relating to defendants' right to a refund. Under the facts here it is my view that evidence of the parol agreement was admissible as coming within well-established exceptions to the parol evidence rule.

It is well settled that evidence of a parol collateral agreement, which neither contradicts nor varies the written instrument, is admissible. (10 R.C.L. 1035; 22 C.J. 1282; 2 Nichols on Applied Evidence, p. 1259; 2 Williston on Contracts, p. 1235.) Here it should be noted that for ten months in the year 1929 defendants paid the price stated in the contract. They are willing to be charged the contract price for the other two months, but contend that under the oral agreement they are entitled to a refund, and on this the counterclaim is based. Plaintiff virtually concedes that the contract price is not binding. It did not sue for the contract price, but in one cause of action on a quantum meruit, and in the other on an account stated. For the year 1928 it allowed refunds in the same manner here claimed by defendants for the year 1929. The agreement for the refund does not contradict or alter the written contract. It had nothing to do with the price which defendants agreed to pay, but only required plaintiff to make a refund to them. (Compare State Finance Corp. v.Ballestrini, 111 Conn. 544, 150 A. 700; Bell Rogers Zemurray Bros v. Jenkins, 221 Ala. 652, 130 So. 396.)

But if we interpret the oral agreement as covering the same subject matter as the written contract, still I think under the circumstances here it is admissible in evidence. The only reason why the written contract did not include the matter of a refund was because of the wish of plaintiff. The written contract did not contain all the prior negotiations. Under such circumstances the entire contract, including the oral stipulations, is admissible. (P.A. Smith Co. v. Muller, 201 Cal. 219,256 P. 411; Lucas v. Individual Mausoleum Co., 134 Kan. 266, 5 P.2d 1077.) And especially is this so where the oral stipulations were a part of the consideration for the written contract. (Armington v. Stelle, 27 Mont. 13, 69 P. 115, 94 Am. St. Rep. 811; Southwestern Pub. Ser. Com. v. Smith, (Tex.Civ.App.) 48 S.W.2d 456.)

If we treat the oral agreement as covering the subject matter of the written contract, then its ultimate effect would be to establish that the written agreement was to be effective only upon a contingency, viz., so long only as the contract price did not exceed the spot market price. The rule is well settled that parol evidence is admissible to show such a situation. (AtlasPetroleum Co. v. Cocklin, (C.C.A.) 59 F.2d 571, and cases there cited.)

In my opinion, to deny defendants the right to show the collateral agreement for a refund would be to use the parol evidence rule as a means of perpetrating, rather than preventing, a fraud, and thus to subvert the purpose of the rule.

Rehearing denied April 28, 1933, MR. JUSTICE ANGSTMAN dissenting.