Determining Scope and content of Obligation

Case: Masterson v. Sine (1968; CA)

Procedural History: Trial court denied the admission of extrinsic evidence by D

and judgment for P. D appealed.

Facts: Dallas and Rebecca Masterson owned a farm as tenants in common. They
conveyed the property to Sine (family), with a 10-year option to buy it back for
the same consideration. Dallas filed for bankruptcy and Rebecca and the trustee
in bankruptcy brought this action to enforce their right to the option. Sine
brought extrinsic evidence that showed the option was personal to Dallas &
Rebecca, and the trustee cannot exercise the option (issue of assignability).
Lower court denied the admission of D's extrinsic evidence, and ruled in favor of
P. D appealed.

Issue: Whether lower court erred in denying the admission of the extrinsic
evidence. Yes.

Holding: Judgment reversed.

Reasoning: precedent is to use the parole evidence rule, but the court says you
can't always just do that; you also have to look to see if other agreements were
made. To some extent, you have to look beyond the written document to know what
other facts are relevant. The written k was silent on assignability and the
option doesn’t specifically provide that it contains the complete agreement. The
collateral agreement is one that might naturally be made as a separate agreement
from the written K. Therefore the extrinsic evidence brought by D should be used
to discover the assignability of the option.

Notes
• Trustee wants to buy it b/c the actual value of the property is well above the
option price.
○ Trustee collects all assets, and pay off creditors
• Option supposedly only exercisable only to Masterson, as a way to keep land in
the family.
○ This is not written down.
• Trial court says the extrinsic evidence cant be brought it, and so P had right
to exercise the option
○ b/c of parole evidence rule, the court doesn’t allow
• Elements of parole evidence?
○ Is it collateral? Yes
○ Did the lack of assignability contradict the option K? Yes
○ Written K + surrounding circumstances. Or that you wouldn’t expect it to
be part of the written K.

• Judge Traynor looks at the written K itself to determine parole evidence should
be admitted.
○ Written K + surrounding circumstances
○ CA cases say you only look at the 4 corners of the doc . - question for
the court is whether the written K appears to be a complete agreement.
□ In Mitchell, Judge only looks at the written K, b/c "an inspection of
this K (and nothing else) shows a full & complete agreement". Court says, we're
going to read the K, and if they believe it's complete, no other evidence is
needed.
○ But Judge Traynor doesn’t like only looking at the written document.
• Why we have a parole evidence rule?
○ Assumption that written evidence is more accurate than human memory
 ○ People may lie. Written evidence more accurate then.
• Judge Traynor doesn’t like the parole evidence rule - we also have to look at
the credibility of the parole evidence
○ The oral agreements should be excluded if fact finder is likely to be
misled. So Judge will hear the parole evidence first, and if determined this is
credible evidence , will allow it in.
○ How does Judge decide?
□ What does the rest say? - permits proof of a collateral agreement as
might naturally be made as a separate agreement by parties situated as were the
parties to the written K.
□ You exclude parole evidence, if Judge says its certain that if
there was an agreement, it would have been in the written agreement. If not
certain if in the written, then jury decides if there was actually the oral
agreement
□ Judge Traynor says that only looking at written doc is flawed - you
have to look outside
• Dissent: Say majority opinion:
○ undermined the parol evidence rule as it has been known in CA since 1872
○ Rendered suspect instruments of conveyence absolute on their face
○ Materially lessened the reliance which might be placed upon written
instruments affecting title to real estate
○ Opened the door, albeit unintentionally, to a new technique for the
defrauding of creditors