Production Credit Ass'n of Green Bay v. Rosner

255 N.W.2d 79, 78 Wis. 2d 543, 1977 Wisc. LEXIS 1264

• Court: Wisconsin Supreme Court
• Decided: June 14, 1977
• Docket: 75-208
• Status: Published

Opinions

ROBERT W. HANSEN, J.

This is an action on a mortgage secured note executed July 29, 1969. The issue on this appeal is whether the parol evidence rule bars admission of testimony by defendant Harvey Rosner that he was told by an employee of plaintiff that he would not be responsible for obligations of his brother, Francis Gene Rosner, under the note of July 20, 1967. This note represented both the consolidation of all previous indebtedness of the two brothers, singly and jointly, and the loan of approximately $22,000.

This court has recent defined the parol evidence rule as follows: ‘"'When the parties to a contract embody their agreement in writing and intend the writing to be the final expression of their agreement, the terms of the writing may not be varied or contradicted by evidence of any prior written or oral agreement in the absence of fraud, duress, or mutual mistake.”¹

In the Federal Deposit Case, this court had before it a situation in which the comakers of a note agreed that there was an unwritten agreement that First Mortgage Investors keep a compensating balance on deposit in the bank. Additionally, the note involved there lacked a term which is generally found in a negotiable instrument, namely the interest rate. Since the parties in Federal Deposit agreed the note did not contain reference to two agreed-upon provisions — interest and collateral — ■ this court held the trial court had erred in not taking evidence “to determine if the parties actually assented to the note — admittedly only part of the agreement— as a superceding document.”² In Federal Deposit where the gap as to interest was apparent on the face of the note, and the parties agreed that there was a contemporaneous oral agreement as to collateral, it was apparent and undisputed that the written note was “incomplete in that only part of the agreement ha[d] been reduced to writing,”³ the parties having “reduced some provisions to written form and left others unwritten.”⁴

In permitting parol evidence to complete such apparently and admittedly incomplete agreement as partially set forth in the note, Federal Deposit held parol evidence could be admitted to complete the unfinished undertaking, but not to vary or alter the terms of the written agreement, quoting from an earlier case:

“[W]hen a writing is shown to be only a partial integration of the agreement reached by the parties, it is proper to consider parol evidence which establishes the full agreement, subject to the limitation that such parol evidence does not conflict with the part that has been integrated in writing.”5

The importance of the limitation, emphasized above, is made clear in the Morn decision by this added holding:

“Therefore, even if, without objection, parol evidence of the intention of the parties to a written contract, which conflicts with the express provisions of such contract, gets into the record, the court must disregard it.”⁶

Thus it is clear and this court has repeatedly held, that oral testimony, to be admissible under the parol evidence rule “. . . must clarify an existing ambiguity and cannot establish an understanding in variance with the terms of the written document.”⁷ If the oral testimony is offered as a part of the entire agreement, “then the oral part of the agreement cannot contradict the written part.”⁸ The ambiguity complained of is not to arise “by resort to oral testimony to create it,” but instead must be offered and limited to help “clarify an ambiguity existing in a written option.”⁹

In the case before us, there is no ambiguity or incompleteness in the mortgage note executed by the parties. Nonetheless, the defendants seek to introduce testimony of a conversation with an employee of plaintiff to contradict and change the clear and unambiguous provisions of the written agreement. Since the conversation relied upon allegedly occurred two years prior to execution of the note involved — that is, in connection with the execution of an earlier note between the parties — we see no basis for an issue as to lack of assent, and find no claim of such.¹⁰ Here we have only a claim of a right to vary the terms of a mortgage note, complete on its face, by introduction of parol evidence that, under any view, would “conflict with the part that has been integrated in writing.”¹¹ That is exactly what the Morn holding, as quoted in Federal Deposit, interdicts.

As made clear in the recent Federal Deposit Case, the parol evidence rule has its defenders and its critics.¹² The defenders see the exclusion of parol evidence offered to vary the terms of a written document as operating to “preserve the integrity and reliability of written contracts, to reduce the opportunity for perjury and to prevent unsophisticated jurors from being misled by false or conflicting testimony.”¹³ Critics view the rule as causing injustices “because it allows a party to avoid a legal obligation which he accepted during the negotiation process.”¹⁴

The dispute as to the appropriate public policy is not for us to resolve. Arguments for repeal or retention of the parol evidence rule are to be addressed to the legislature, not the courts. Our court has, more than once, made clear that “[t]he parol-evidence rule is not so much the rule of evidence as the rule of substantive law. . . .”,¹⁵

Thus, under the law in this state as it long has been, under the law as it was at the time of the execution of the mortgage note here involved, and under the law as it will continue to be unless or until the legislature elects to change it, we hold that parol evidence was not, in this case and under these circumstances, admissible to vary or contradict express terms of the written agreement between the parties to this lawsuit.

As no more than a postscript, we affirm the ruling of the trial court that a letter sent by plaintiff to defendants, containing an offer or suggestion of compromise settlement as between the two Rosner brothers, was not admissible into evidence. Such mere offer, not accepted by the parties, was inadmissible under the provisions of sec. 904.08, Stats.¹⁶ Defendants’ liability on the note was in no way affected by a suggestion for settlement not agreed to by the parties.

By the Court. — Judgment affirmed.

1 Fed. Deposit Ins. Corp. v. First Mortg. Investors, 76 Wis.2d 151, 156, 250 N.W.2d 362 (1977), citing 3 Corbin on Contracts, sec. 573 (1960), which states the rule as follows: “When two parties have made a contract and have expressed it in a writing to which they have both assented as the complete and accurate integration of that contract, evidence, whether parol or otherwise, of antecedent understandings and negotiations will not be admitted for the purpose of varying or contradicting the writing.” See also: Bunburg v. Krauss, 41 Wis.2d 522, 528, 529, 164 N.W.2d 473 (1969).

2 Id. at 163.

3 Id. at 157.

⁴

5 Morn v. Schalk, 14 Wis.2d 307, 314, 111 N.W.2d 80 (1961).

6 Id. at 315.

7 Conrad Milwaukee Corp. v. Wasilewski, 30 Wis.2d 481, 488, 141 N.W.2d 140 (1966), citing Firestone Tire & Rubber Co. v. Werner, 204 Wis. 306, 236 N.W. 118 (1931); August Brandt & Co. v. Verhagen, 161 Wis. 3, 152 N.W. 448 (1915).

8 Id. at 488, citing Will of Paulson, 252 Wis. 161, 31 N.W.2d 182 (1948); Hannon v. Kelly, 156 Wis. 509, 146 N.W.2d 512 (1914); 2 Jones, Evidence (5th ed.), pages 887, 888, sec. 466.

9 Id. at 488.

10 ° See: Bunbury v. Krauss, supra, n. 1, at 529, this court upholding the trial court holding that the -written contract of the parties was not assented to, agreeing with the trial judge that “. . . the parties did not assent to the land contract as the complete and accurate 'integration’ of the contract.”

11 ' Morn v. Schalk, supra, n. 5, at 314.

12 Fed. Deposit Ins. Corp. v. First Mortg. Investors, supra, n. 1, at 156.

13 Id. at 156.

14 Id at 156.

15 Conrad Milwaukee Corp. v. Wasilewski, supra, n. 7, at 488, citing Morn v. Schalk, supra, n. 5.

16 Sec. 904.08, Stats., entitled Compromise and offers to compromise, providing: “Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations is likewise not admissible. . .