BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 824
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          Date of Hearing:   May 7, 2013

                           ASSEMBLY COMMITTEE ON JUDICIARY
                                Bob Wieckowski, Chair
                  AB 824 (Jones) - As Introduced:  February 21, 2013

                                  PROPOSED CONSENT
           
          SUBJECT  :  WRITTEN AGREEMENTS: EXCLUSION OF EVIDENCE

           KEY ISSUE  :  SHOULD THE PAROL EVIDENCE RULE, WHICH EXPRESSLY NOW  
          APPLIES ONLY TO DEEDS, WILLS, AND CONTRACTS, BE AMENDED TO  
          CODIFY CASE LAW ESTABLISHING THAT TRUST INSTRUMENTS ARE ALSO IN  
          THE SCOPE OF THE RULE? 

           FISCAL EFFECT  :  As currently in print this bill is keyed  
          non-fiscal.

                                      SYNOPSIS

          This non-controversial bill, sponsored by the Conference of  
          California Bar Associations, seeks to amend the parol evidence  
          rule to expressly include trust agreements among the types of  
          written agreements to which the rule applies.  The parol  
          evidence rule embodies the longstanding principle that if a  
          written agreement is intended to be final and complete, its  
          terms cannot be contradicted by evidence of an earlier agreement  
          or contemporaneous oral agreement.  Section 1856 of the Code of  
          Civil Procedure, the statutory expression of this rule in  
          California, currently applies only to written agreements that  
          include deeds, wills, and contracts between parties.  This bill  
          would simply codify case law establishing that trust instruments  
          are in the scope of the parol evidence rule.  There is no known  
          opposition to this bill.

           SUMMARY  :  Provides that the parol evidence rule, in addition to  
          deeds, wills, and contracts between parties, also shall apply to  
          trust agreements.  

           EXISTING LAW  :  

          1)Provides that terms set forth in a writing intended by the  
            parties as a final expression of their agreement with respect  
            to such terms as are included therein may not be contradicted  
            by evidence of any prior agreement or of a contemporaneous  








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            oral agreement.  (Code of Civil Procedure Section 1856(a).   
            Unless otherwise stated, all further references are to this  
            code.)

          2)Defines "agreement", for purposes of the parol evidence rule,  
            to include deeds and wills, as well as contracts between  
            parties.  (Section 1856(f).)

          3)Provides that the terms set forth in a writing to which the  
            rule applies may be explained or supplemented by evidence of  
            consistent additional terms unless the writing is intended  
            also as a complete and exclusive statement of the terms of the  
            agreement.  (Section 1856(b).)

          4)Provides that the terms set forth in a writing to which the  
            rule applies may be explained or supplemented by course of  
            dealing or usage of trade or by course of performance.   
            (Section 1856(c).)

          5)Provides that the court shall determine whether the writing is  
            intended by the parties as a final expression of their  
            agreement with respect to such terms as are included therein  
            and whether the writing is intended also as a complete and  
            exclusive statement of the terms of the agreement.  (Section  
            1856(d).)

           COMMENTS  :  This non-controversial bill, sponsored by the  
          Conference of California Bar Associations, seeks to amend the  
          parol evidence rule to expressly include trust agreements among  
          the types of written agreements to which the rule applies.  

          The parol evidence rule is a rule of substantive law that  
          generally prohibits the introduction of any extrinsic evidence,  
          whether oral or written, to vary, alter, or contradict the terms  
          of an integrated written instrument intended by the parties as a  
          final expression of their agreement. (Morey v. Vanunucci (1998)  
          64 Cal.App. 4th 904.)  Section 1856 of the Code of Civil  
          Procedure, the statutory expression of this rule in California,  
          currently applies only to written agreements that include deeds,  
          wills, and contracts between parties.  

          This bill would simply codify case law establishing that trust  
          instruments are in the scope of the parol evidence rule.   
          According to the author:









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               The issue arises from time to time in pleadings, when  
               an inexperienced lawyer argues that trust instruments  
               should not be subject to the parol evidence rule.   
               Although these arguments are quickly disposed of by  
               reference to case law, everyone's time has already  
               been wasted in the process.  This simple change will  
               promote clarity and consistency in the law, and will  
               reduce unnecessary litigation and cost by obviating  
               any obviously futile attempts to litigate the issue of  
               whether the parol evidence rule applies in these  
               cases.

          Despite the fact that trust instruments are not specifically  
          mentioned in Section 1856, courts in California have repeatedly  
          held that trust instruments are within the scope of the parol  
          evidence rule.  (See, e.g., Lonely Maiden Productions, LLC. v.  
          Goldentree Asset Management, LP (2011) 201 Cal. App. 4th 368,  
          holding that in interpreting the settlor's words and conduct in  
          connection with the alleged creation of a trust, the  
          circumstances surrounding the transfer may be considered unless  
          they are excluded by the parol evidence rule.  See also Miller  
          v. Security-First National Bank of Los Angeles (1933) 219  
          Cal.120, 128-129; Wells Fargo Bank v. Marshall (1993) 20  
          Cal.App.4th 447, 453; Levy v. Crocker-Citizens National Bank  
          (1971) 14 Cal.App.3d 102, 104;  Krapp v. Sterling Savings and  
          Loan Assoc. (1970) 9 Cal.App.3d 1033, 1045.)

          The purpose of the California parol evidence rule is to make  
          sure the parties' final understanding, deliberately expressed in  
          writing, shall not be changed.  (Iconix v. Tokuda (2006) 457  
          F.Supp.2d 969.)  In disputes involving trust instruments, courts  
          have held that it is the intention of the trustor which is the  
          focus of the court's inquiry.  (Estate of Lindner (1978) 85  
          Cal.App.3d 219, 226.)  Courts have held that in interpreting a  
          document such as a trust, it is proper for the court to consider  
          the circumstances under which the document was made so that the  
          court may be placed in the position of the trustor whose  
          language it is interpreting, in order to determine whether the  
          terms of the document are clear and definite, or ambiguous in  
          some respect.  (Estate of Russell (1968) 69 Cal.2d 200,  
          208-210.)  For these reasons, the author contends that it is  
          good public policy for the parol evidence rule to also apply to  
          trust instruments, so as to ensure that the intent of the  
          trustor and the integrity of the final written agreement are  
          protected by the rule, as they are for deeds, wills, and other  








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          contracts between parties.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Conference of California Bar Associations (CCBA)

           Opposition 
           
          None on file
           
          Analysis Prepared by  :   Anthony Lew / JUD. / (916) 319-2334