BILL ANALYSIS Ó AB 824 Page 1 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 AB 824 Page 2 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: AB 824 Page 3 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 AB 824 Page 4 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