Leitz v. Thorson

833 P.2d 343, 113 Or. App. 557, 1992 Ore. App. LEXIS 1311

• Court: Court of Appeals of Oregon
• Decided: June 24, 1992
• Docket: 90-CV-0027-MS; CA A68007
• Status: Published

Opinions

EDMONDS, J.

Defendant appeals from a judgment for breach of contract and fraud. He argues that the trial court erred by denying his motion for a directed verdict on plaintiffs’ contract claim.¹ ORCP 60. We affirm.

Plaintiffs leased commercial space from defendant to open a florist shop. After the lease was executed, plaintiffs learned that they could not place another freestanding sign along the highway to advertise the business, because the Deschutes County Code allows only one freestanding sign on the property. A freestanding sign advertising a business owned in part by defendant was already in place. Plaintiffs filed this action and alleged that defendant had breached the lease by failing to provide them with space in the complex for which a freestanding sign could be erected. Paragraph 16 of the lease provides, in part:

“Tenant shall not erect or install any signs or advertising media or door lettering or placards visible from outside the leased premises with out [sic] the previous written consent of the Landlord.”

During trial, plaintiffs sought to introduce evidence that, before the lease was executed, defendant told them that they could have a freestanding sign. Defendant objected to the testimony on the basis that proving the alleged oral agreement would violate the Parol Evidence Rule. ORS 41.740. The court admitted the testimony. After plaintiffs rested, defendant moved for a directed verdict, arguing that, without the testimony about the oral statement, there was no basis on which to find that defendant had breached the lease agreement. The trial court held:

“[I]n reviewing this agreement, I have to say that there are many appendixes that are referred to, none of which were completed or attached to the document — that being the contract.

“Based on the testimony that I heard and I believe that this is not a fully integrated contract and that the additional evidence concerning the terms is not inconsistent with the written contract. And two, it is that which might naturally be made as a separate agreement by parties situated as the parties were in this particular instance.”

Defendant argues that the trial court erred by holding that the Parol Evidence Rule does not bar plaintiffs’ testimony that defendant had orally agreed that they could have a freestanding sign. ORS 41.740 provides, in part:

“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 where a mistake or imperfection of the writing is put in issue by the pleading 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 * *

The rule is a rule of integration. It prohibits oral evidence of those aspects of the bargain that the parties intended to memorialize in the writing. Caldwell et ux v. Wells, 228 Or 389, 395, 365 P2d 505 (1961). If the parties did not intend the writing to represent their entire agreement, the agreement is only partially integrated, and prior consistent additional terms not evidenced by the writing may still form part of the entire agreement. Siegner v. Interstate Production Credit Assn., 109 Or App 417, 425, 820 P2d 20 (1991). An oral agreement is not integrated in a contemporaneous writing if it is not inconsistent with the written agreement and is “such an agreement as might naturally be made as a separate agreement by parties situated as were parties to the written contract.”² Hatley v. Stafford, 284 Or 523, 533, 588 P2d 603 (1978).

Our review is to determine whether the trial court’s conclusion that the lease is not a fully integrated agreement is supported by the evidence. O’Meara v. Pritchett, 97 Or App 329, 336, 776 P2d 866, rev den 308 Or 465 (1989). We start with a presumption that the writing is intended to be a complete integration. Hatley v. Stafford, supra, 284 Or at . The integration clause³ in this lease is an indication that the lease was intended to be a complete integration, but it is not conclusive. Howell v. Oregonian Publishing Co., 82 Or App 241,245, 728 P2d 106 (1986), mod 85 Or App 84, 735 P2d 659, rev den 303 Or 699 (1987). Oral admissions of a party-may be probative of whether the agreement is integrated. DeVore v. Weyerhaeuser Co., 265 Or 388, 403, 508 P2d 220 (1973), cert den 415 US 913 (1974).

Defendant testified that the written form that he had used for the lease was not drafted to be used specifically for this property. Although the lease required attachment of exhibits, he admitted that no exhibits were attached to the lease. He conceded that he told plaintiffs that they could have a sign and that he did not require his written consent, despite the words in paragraph 16 of the lease. He admitted that, during the lease negotiations, the parties had discussed plaintiffs’ renovations. He said that he did not require those plans to be in writing, even though the lease required his written consent before alterations, additions or installations on the premises. Defendant also testified:

“Usually our detail comes later, after they’ve, you know, gotten their lease signed, and they’re — they get it figured out, and they measure and come up with information on saying: well, this is what we’re going to do.”⁴

There was evidence to support the trial court’s conclusion that the parties did not intend the written lease to reflect their entire agreement, thereby overcoming the presumption of integration.

The next question is whether a separate oral agreement to allow a freestanding sign was inconsistent with the written lease. Although defendant admitted that he told plaintiffs they could have a sign, he disputes whether he told them that the sign could be “freestanding.” No provision of the lease prohibits a freestanding sign. The disputed parol evidence was not inconsistent with the written agreement.

Finally, the issue is whether the oral term is one that “naturally” would have been included in the writing. Hatley v. Stafford, supra, 284 Or at 534. In Greenwade v. Citizens Bank of Oregon, 50 Or App 395, 401, 624 P2d 610 (1981), we said:

“[W]e turn to the second part of the Restatement test: the intent of the parties as indicated by all the circumstances. In discussing the Restatement test, [3] Corbin[, Contracts (I960),] states in part, § 584 at 480:

“ ‘Observe, secondly, that Clause (b) states that the oral agreement is not superseded by the writing if it is “such an agreement as might naturally be made as a separate agreement by parties situated as were the parties to the written contract.” This requires the court to determine what would be “natural” and what would not. * * * The parol evidence rule purports only to exclude evidence in case there is an “integration” that the evidence is offered to contradict or vary. * * * Whether or not it was “natural” for the parties to do as they did bears only on the credibility of the evidence offered. This form of language makes the admissibility of an added but not inconsistent term practically discretionary with the court.’ (Emphasis supplied.)”

There is evidence to support the trial court’s finding that the parties did not intend the written lease to be their complete agreement, that the oral agreement is not inconsistent with the written agreement and that the oral agreement would have been made naturally as a separate agreement. The trial court did not err.

Affirmed.

1 Defendant does not appeal from the judgment for fraud. The trial court awarded plaintiffs $11,884.93 in damages for both claims and $11,500 in attorney-fees on the breach of contract claim.

2 Plaintiffs do not contend that the oral agreement was supported by a separate consideration.

3 The lease provides:

“This lease, including the exhibits and riders, if any, attached hereto and forming a part hereof, are all of the covenants, promises, agreements, conditions and understandings, either oral or written, between the parties. No subsequent alteration, change or amendment to this lease shall be binding upon the parties unless reduced to writing and signed by them.”

4 In addition, plaintiffs testified that defendant told them, before signing the lease, that they could ignore those clauses of the lease that required his written permission. They testified that defendant had agreed to, and did, paint the building, although that was not part of the written lease. There was also evidence that the parties had agreed that plaintiffs could put in a flower bed and plumbing.