BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 824| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- CONSENT Bill No: AB 824 Author: Jones (R) Amended: As introduced Vote: 21 SENATE JUDICIARY COMMITTEE : 7-0, 06/11/13 AYES: Evans, Walters, Anderson, Corbett, Jackson, Leno, Monning ASSEMBLY FLOOR : 75-0, 5/13/13 (Consent) - See last page for vote SUBJECT : Written agreements: exclusion of evidence SOURCE : Conference of California Bar Associations DIGEST : This bill adds trust instruments to the list of agreements that are covered by the statute codifying the parol evidence rule. ANALYSIS : Existing law: 1. Provides that the terms set forth in a writing intended by the parties as a final expression of their agreement as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement. 2. Provides that the terms set forth in a writing described above may be explained or supplemented by evidence of CONTINUED AB 824 Page 2 consistent additional terms unless the writing is intended also as a complete and exclusive statement of the terms of the agreement. 3. Requires that the court 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. 4. Specifies circumstances under which evidence is not excluded, including, among other things, evidence of a mistake or imperfection in the writing that is put in issue by the pleadings, or where the validity of the agreement is in dispute. 5. Defines "agreement" to include deeds and wills, as well as contracts between parties. This bill amends the definition above to include "trust instruments" and makes other technical changes. Background Codified the Code of Civil Procedure, Section 1856, the parol evidence rule, with certain exceptions, operates to bar the introduction of any extrinsic evidence (oral or written) to vary or add to the terms of a complete and final written agreement. This rule is not merely a rule of evidence; rather, it is a rule of substantive law which holds that the act of embodying the complete terms of an agreement in writing becomes the contract of the parties. In other words, as a matter of law, the writing is the agreement and extrinsic evidence is excluded because it cannot serve to prove what the agreement was when the agreement has already been determined to be the writing itself. (2 Witkin Cal. Evid. Documentary Evidence Secs. 59, 62.) A writing constitutes an integration when it is intended to be a final expression of one or more terms of the parties' agreement. (Code of Civil Procedure [CCP] Section 1856(a).) The existence of integration, which triggers the application of the parol evidence rule, is a question of law for the judge, as opposed to a question of fact for the jury. The judge must also decide whether the writing is intended also as a complete and exclusive CONTINUED AB 824 Page 3 statement of the terms of the agreement-in other words, if the agreement was completely integrated. (CCP Section 1856(d).) If it is a completely integrated agreement, then, generally, no extrinsic evidence may be introduced (exceptions are made in some circumstances, such as where a mistake or imperfection in the writing is put at issue in the pleadings.) If not, then evidence of a consistent collateral term would not necessarily be barred by the parol evidence rule. To help illustrate this distinction, a written contract between an inventor and an entity may provide that royalties received from a license of the inventor's invention should be paid to the entity. While the contract may, in fact, constitute an integrated agreement as to the form of payment and thereby bar any introduction of extrinsic evidence as to that agreement, other evidence may still be relevant and introduced in court to establish an agreement as to the use of that money-such as where it is alleged that the entity had agreed use those royalties to conduct research in the inventor's particular field. (Simmons v. California Institute of Technology (1949) 34 Cal.2d 264.) In such an instance, the introduction of the evidence is not permitted in order to contradict the writing, but rather, operates to prove a consistent additional agreed upon term that is either agreed to for separate consideration or is such a term as in the circumstances might naturally be omitted from the writing. (2 Witkin Cal Evid., Documentary Evidence, Sections 65, 68, 86-87.) FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 6/12/13) Conference of California Bar Associations (source) ARGUMENTS IN SUPPORT : According to the author: Code of Civil Procedure [Section] 1856 sets forth California's statutory "parol evidence rule," which states, in effect, that if a contract (or other similar document) is intended to be final and complete, its terms cannot be contracted by evidence of an earlier agreement or contemporaneous oral agreement. The section specifically CONTINUED AB 824 Page 4 refers to deeds, wills, and contracts between the parties, but not trust instruments. It is completely logical and good policy for trust instruments to be included within the parol evidence rule. Courts have recognized this fact, and there is an abundance of case law holding that trust instruments are indeed within the rule's scope. (See Miller v. Security-First National Bank of Los Angeles (1933) 219 Cal. 120, 128-129, Lonely Maiden Productions, LCC v. Goldentree Asset Mgmt., LP (2011) 201 Cal.App.4th 447, 453, Wells Fargo Bank v. Marhsall (1993) 20 Cal.App.4th 447, 453; Levy v. Crocker-Citizens National Bank (1971) 14 Cal.App.3d 102, 104, Kr[o]pp v. Sterling Savings and Loan Assoc. (1970) 9 Cal.App.3d 1033, 1045.) Case law notwithstanding, the fact is that the statute does not include trust instruments in the list of agreements subject to the parol evidence rule. By adding trust instruments to the list, AB 824 would promote clarity and predictability in probate and trust litigation by codifying existing case law. It also would reduce unnecessary litigation and cost to the extent the change would discourage (obviously futile) attempts to litigate the issue of whether the parol evidence rule applies in these cases. ASSEMBLY FLOOR : 75-0, 5/13/13 AYES: Achadjian, Alejo, Atkins, Bigelow, Bloom, Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Jones, Jones-Sawyer, Levine, Linder, Logue, Maienschein, Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting, Torres, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A. Pérez NO VOTE RECORDED: Allen, Ammiano, Holden, Lowenthal, Vacancy AL:d 6/12/13 Senate Floor Analyses CONTINUED AB 824 Page 5 SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED