34 Minn. 374

JOSEPH H. THOMPSON vs. ROWLAND C. LIBBY.

Supreme Court of Minnesota.

December 19, 1885.

Appeal by plaintiff from an order of the district court for Dakota county,

Crosby, J., presiding, refusing a new trial. The case is stated in the opinion.

W. E. Hale, for appellant.

Stringer & Seymour, for respondent.

MITCHELL, J. The plaintiff being the owner of a quantity of logs marked “H. C. A.,” cut in the winters of 1882 and 1883, and lying in the Mississippi river, or on its banks, above Minneapolis, defendant and the plaintiff, through his agent, D. S. Mooers, having fully agreed on the terms of a sale and purchase of the logs referred to, executed the following written agreement:

AGREEMENT. HASTINGS, MINN., June 1, 1883.

I have this day sold to R. C. Libby, of Hastings, Minn., all my logs marked “H. C. A.,” cut in the winters of 1882 and 1883, for ten dollars a thousand feet, boom scale at Minneapolis, Minnesota. Payments cash as fast as scale bills are produced.

[Signed] J. H. THOMPSON, Per D. S. MOOERS. C. LIBBY.

This action having been brought for the purchase-money, the defendant — having pleaded a warranty of the quality of the logs, alleged to have been made at the time of the sale, and a breach of it — offered on the trial oral testimony to prove the warranty, which was admitted, over the objection of plaintiff that it was incompetent to prove a verbal warranty, the contract of sale being in writing. This raises the only point in the case.

No ground was laid for the reformation of the written contract, and any charge of fraud on part of plaintiff or his agent in making the sale was on the trial expressly disclaimed. No rule is more familiar than that “parol contemporaneous evidence is inadmissible to contradict or vary the terms of a valid written instrument,” and yet none has given rise to more misapprehension as to its application. It is a rule founded on the obvious inconvenience and injustice that would result if matters in writing, made with consideration and deliberation, and intended to embody the entire agreement of the parties, were liable to be controlled by what Lord Coke expressly calls “the uncertain testimony of slippery memory.” Hence, where the parties have deliberately put their engagements into writing in such terms as to import a legal obligation, without any uncertainty as to the object or extent of such engagement, it is conclusively presumed that the whole engagement of the parties, and the manner and extent of their undertaking, was reduced to writing. 1 Greenl. Ev. § 275. Of course, the rule presupposes that the parties intended to have the terms of their complete agreement embraced in the writing, and hence it does not apply where the writing is incomplete on its face and does not purport to contain the whole agreement, as in the case of mere bills of parcels, and the like.

But in what manner shall it be ascertained whether the parties intended to express the whole of their agreement in writing? It is sometimes loosely stated that where the whole contract be not reduced to writing, parol evidence may be admitted to prove the part omitted. But to allow a party to lay the foundation for such parol evidence by oral testimony that only part of the agreement was reduced to writing, and then prove by parol the part omitted, would be to work in a circle, and to permit the very evil which the rule was designed to prevent. The only criterion of the completeness of the written contract as a full expression of the agreement of the parties is the writing itself. If it imports on its face to be a complete expression of the whole agreement, — that is, contains such language as imports a complete legal obligation, — it is to be presumed that the parties have introduced into it every material item and term; and parol evidence cannot be admitted to add another term to the agreement, although the writing contains nothing on the particular one to which the parol evidence is directed. The rule forbids to add by parol where the writing is silent, as well as to vary where it speaks, — 2 Phil. Evidence, (Cow. & H. Notes,) 669; Naumberg v. Young, 44 N. J. Law, 331 Hei v. Heller, 53 Wis. 415, — and the law controlling the operation of a written contract becomes a part of it, and cannot be varied by parol any more than what is written. 2 Phil. Ev. (Cow. & H. Notes.) 668; La Farge v.Rickert, 5 Wend. 187; Creery v.Holly,14 Wend. 26; Stone v.Harmon, 31 Minn. 512.

The written agreement in the case at bar, as it appears on its face, in connection with the law controlling its construction and operation, purports to be a complete expression of the whole agreement of the parties as to the sale and purchase of these logs, solemnly executed by both parties. There is nothing on its face (and this is a question of law for the court) to indicate that it is a mere informal and incomplete memorandum. Parol evidence of extrinsic facts and circumstances would, if necessary, be admissible, as it always is, to apply the contract to its subject-matter, or in order to a more perfect understanding of its language. But in that case such evidence is used, not to contradict or vary the written instrument, but to aid, uphold, and enforce it as it stands. The language of this contract “imports a legal obligation, without any uncertainty as to its object or the extent of the engagement,” it must be conclusively presumed that the whole engagement of the parties, and the manner and extent of the undertaking, was reduced to writing. No new term, forming a mere incident to or part of the contract of sale, can be added by parol.

That in case of a sale of personal property a warranty of its quality is an item and term of the contract of sale, and not a separate and independent collateral contract, and therefore cannot be added to the written agreement by oral testimony, has been distinctly held by this court, in accordance, not only with the great weight of authority, but also, as we believe, with the soundest principles. Jones v. Alley, 17 Minn. 269, (292).

We are referred to Healy v. Young, 21 Minn. 389, as overruling this. This is an entire misapprehension of the point decided in the latter case. In Healy v. Young the claim of defendant was that for a certain consideration plaintiff agreed verbally to release a certain [379] debt, and also to convey certain personal property; and that, in part-performance of this prior verbal agreement, he executed a bill of sale of the property. What was decided was that the execution in writing of the bill of sale in part-performance of this verbal agreement did not preclude defendant from proving by parol the prior agreement. The parties had not put their original agreement in writing, and the bill of sale executed in part-performance in no way superseded it. Moreover, the promise to release the debt was a distinct collateral matter from that covered by the bill of sale, and in that view of the case it was immaterial whether the oral agreement preceded or was contemporaneous with the bill of sale.

In opposition to the doctrine of Jones v. Alley, we are referred to a few cases which seem to hold that parol evidence of a warranty is admissible on the ground that a warranty is collateral to the contract of sale, and that the rule does not exclude parol evidence of matters collateral to the subject of the written agreement. It seems to us that this is based upon a misapprehension as to the sense in which the term “collateral” is used in the rule invoked. There are a great many matters that, in a general sense, may be considered collateral to the contract; for example, in the case of leases, covenants for repairs, improvements, payment of taxes, etc., are, in a sense, collateral to a demise of the premises. But parol evidence of these would not be admissible to add to the terms of a written lease. So, in a sense, a warranty is collateral to a contract of sale, for the title would pass without a warranty. It is also collateral in the sense that its breach is no ground for a rescission of the contract by the vendor, but that he must resort to his action on the warranty for damages. But, when made, a warranty is a part of the contract of sale. The common sense of men would say, and correctly so, that when, on a sale of personal property, a warranty is given, it is one of the terms of the sale, and not a separate and independent contract. To justify the admission of a parol promise by one of the parties to a written contract, on the ground that it is collateral, the promise must relate to a subject distinct from that to which the writing relates. Dutton v. Gerrish; 9 Cush. 89; Naumberg v. Young, supra; 2 Taylor, Ev. §1038. See Lindley v. Lacey, 34 Law J., C. P., 7.

We have carefully examined all the cases cited in the quite exhaustive brief of counsel for defendant, and find but very few that are at all in conflict with the views already expressed, and these few do not commend themselves to our judgment. Our conclusion therefore is that the court erred in admitting parol evidence of a warranty, and therefore the order refusing a new trial must be reversed.

6 El. & Bl. 370
119 Eng. Rep. 903

JOHN PYM
against
ROBERT JAMES ROY CAMPBELL, JAMES THOMPSON MACKENZIE AND RICHARD PASTOR PRITCHARD.

Saturday, May 3d, 1856.

[119 Eng. Rep. 903] [6 El. & Bl. 370] Action on an agreement for sale. Plea, Non assumpsit. On the trial plaintiff produced an agreement signed by defendant. Defendant gave evidence that plaintiff and defendant, having negotiated as to the purchase, agreed on the terms, and it was arranged that they and a third person, A., should meet, when, if A. approved of the property, they would make a bargain on these terms. At the meeting plaintiff did not attend till A. had gone. It was then arranged that plaintiff and defendant should draw up and sign a memorandum of an agreement of sale, but that it should not be a bargain until A., on being consulted, approved. A. did not approve. The Judge directed the jury to find for defendant if satisfied that it was arranged that the writing should be no agreement until A. approved.—Held, a right direction.

[S.C. 25 L.J. Q.B. 277; 2 Jur. N. S. 641; 4 W.R. 528. Applied, Wallis v. Littell, 1861, 11 C.B.N.S. 375. Discussed, Rogers v. Hadley, 1863, 2 H. & C. 249. Referred to, Guardhouse v. Blackburn, 1866, L.R. 1 P. & D. 115. Applied, Clever v. Kirkman, 1875, 33 L.T. 673. Followed, Pattle v. Hornibrook, [1897] 1 Ch. 30.]

First count. That defendants agreed to purchase of the plaintiff, for £800, three eighth parts of the benefits to accrue from an invention of plaintiff's. General averments of readiness to convey, and tender of a conveyance of the three eighths. Breach: that defendants refused to accept them. Counts for shares in inventions bargained and sold, and on accounts stated. Pleas. 1st, to first count: That defendants did not agree. 9th, to the other counts: Never indebted. It is not necessary to notice the other seven pleas.

On the trial, before Lord Campbell C.J., at the Sittings at Guildhall after last Hilary term, the plaintiff was called as a witness. He produced and gave in evidence a paper of which the following is a copy.

"£500 for a quarter share. £300 for one eighth, and £50 to be paid to Mr. Sadler. No other shares to be sold without mutual consent for three months. London, 17th January 1854.

"One eighth. R. J. R. Campbell.
                   John Pym.
"One eighth. J. T. Mackenzie.
"One eighth. R. P. Pritchard.

[119 Eng. Rep. 904] [6 E. & Bl. 371] With reference to the above agreement and in consideration of the sum of five pounds paid me I engage, within two days from this date, to execute the legal documents, to the satisfaction of your solicitors, to complete your title to the respective interests against your names in my Crushing, Washing and Amalgamating Machine.

"London. 17 January 1854.                                                                                        "JOHN PYM."

He gave evidence that he was inventor of a machine which he wished to sell through the instrumentality of one Sadler, who had introduced the defendants to him; that, after some negotiations, the defendant Campbell drew out the above paper, which both plaintiff and defendants then signed, and which plaintiff took away.

The defendants gave evidence that, in the course of the negotiations with the plaintiff, they had got so far as to agree on the price at which the invention should be purchased if bought at all, and had appointed a meeting at which the plaintiff was to explain his invention to two engineers appointed by the defendants, when, if they approved, the machine should be bought. At the appointed time the defendants and two engineers of the names of Fergusson and Abernethie attended; but the plaintiff did not come; and the engineers went away. Shortly after they were gone the plaintiff arrived. Fergusson was found, and expressed a favourable opinion; but Abernethie could not then be found. It was then proposed that, as the parties were all present, and might find it troublesome to meet again, an agreement should be then drawn up and signed, which, if Abernethie approved of the invention, should be the agreement, but, if Abernethie did not approve, should not be one. Abernethie did not approve of the invention when he saw it; and the defendants contended that there was no bargain.

[6 El. & Bl. 372] The Lord Chief Justice told the jury that, if they were satisfied that, before the paper was signed, it was agreed amongst them all that it should not operate as an agreement until Abernethie approved of the invention, they should find for the defendant on the pleas denying the agreement. Verdict for the defendants.

Thomas Serjt., in the ensuing term, obtained a rule nisi for a new trial on the ground of misdirection.

Watson and Manisty now^[a] shewed cause. The direction was correct. When parties have signed an instrument in writing as the record of their contract, it is not competent to them to shew by evidence that the contract really was something different from that contained in the writing; and therefore in this case, if the defendants had signed this as an agreement, they could not have shewn that the agreement was subject to a condition. But they may shew that the writing was signed on the terms that it should be merely void till a condition was fulfilled; for that shews there never was a contract; Davies v. Jones (17 Com. B. 625). So, where the holder of a bill writes his name on it and hands it over, that is no indorsement if it was done on the terms that it should not operate as an indorsement till a condition is fulfilled; Bell v. Lord Ingestre (12 Q.B. 317), Marston v. Allen^[d]. It is true that a deed cannot be delivered as an escrow to the party (Co. Litt. 36, a): but that is for purely technical reasons, inapplicable to parol contracts.

[6 El. & Bl. 373] Thomas Serjt. and J. H. Hodgson, contra. The very object of reducing a contract to writing and signing it is to prevent all disputes as to the terms of the contract. Here the attempt is to shew by parol that the agreement to take this invention was subject to a condition that Abernethie approved; while the writing is silent as to that. Davies v. Jones (17 Com. B. 625) proceeded on the ground that the instrument was imperfect; the cases as to bills of exchange proceed upon the necessity that there should be a delivery to make an indorsement.

Erle J. I think that this rule ought to be discharged. The point made is that this is a written agreement, absolute on the face of it, and that evidence was admitted to shew it was conditional: and if that had been so it would have been wrong. But I am of opinion that the evidence shewed that in fact there was never any agreement at all. The production of a paper purporting to be an agreement by a party, with [119 Eng. Rep. 905] his signature attached, affords a strong presumption that it is his written agreement; and, if in fact he did sign the paper animo contrahendi, the terms contained in it are conclusive, and cannot be varied by parol evidence: but in the present case the defence begins one step earlier: the parties met and expressly stated to each other that, though for convenience they would then sign the memorandum of the terms, yet they were not to sign it as an agreement until Abernethie was consulted. I grant the risk that such a defence may be set up without ground; and I agree that a jury should therefore always look on such a defence with suspicion: but, if it be proved that in fact [6 El. & Bl. 374] the paper was signed with the express intention that it should not be an agreement, the other party cannot fix it as an agreement upon those so signing. The distinction in point of law is that evidence to vary the terms of an agreement in writing is not admissible, but evidence to shew that there is not an agreement at all is admissible.

Crompton J. I also think that the point in this case was properly left to the jury. If the parties had come to an agreement, though subject to a condition not shewn in the agreement, they could not shew the condition, because the agreement on the face of the writing would have been absolute, and could not be varied: but the finding of the jury is that this paper was signed on the terms that it was to be an agreement if Abernethie approved of the invention, not otherwise. I know of no rule of law to estop parties from shewing that a paper, purporting to be a signed agreement, was in fact signed by mistake, or that it was signed on the terms that it should not be an agreement till money was paid, or something else done. When the instrument is under seal it cannot be a deed until there is a delivery; and when there is a delivery that estops the parties to the deed; that is a technical reason why a deed cannot be delivered as an escrow to the other party. But parol contracts, whether by word of mouth or in writing, do not estop. There is no distinction between them, except that where there is a writing it is the record of the contract. The decision in Davis v. Jones (17 Com. B. 625) is, I think, sound law, and proceeds on a just distinction: [6 El. & Bl. 375] the parties may not vary a written agreement; but they may shew that they never came to an agreement at all, and that the signed paper was never intended to be the record of the terms of the agreement; for they never had agreeing minds. Evidence to shew that does not vary an agreement, and is admissible.

Lord Campbell C.J. I agree. No addition to or variation from the terms of a written contract can be made by parol: but in this case the defence was that there never was any agreement entered into. Evidence to that effect was admissible; and the evidence given in this case was overwhelming. It was proved in the most satisfactory manner that before the paper was signed it was explained to the plaintiff that the defendants did not intend the paper to be an agreement till Abernethie had been consulted, and found to approve of the invention; and that the paper was signed before he was seen only because it was not convenient to the defendants to remain. The plaintiff assented to this, and received the writing on those terms. That being proved, there was no agreement.

(Wightman J., not having heard the whole argument, gave no opinion.)

Rule discharged

[a] Before Lord Campbell C.J., Erle and Crompton Js. The argument was completed, and judgment given, on May 5, before the same Judges and Wightman J.

[d] 8 M. & W. 494. See Lloyd v. Howard, 15 Q.B. 995; Barber v. Richards, 6 Exch. 63.

219 Cal. 439
LOUIS N. CRAWFORD, Appellant,
v.
J. E. FRANCE, Respondent.
L. A. No. 14381.
November 28, 1933. 

APPEAL from a judgment of the Superior Court of the County of Santa Barbara. Pat R. Parker, Judge Presiding. Affirmed.

The facts are stated in the opinion of the court.

Shaeffer & Weldon for Appellant.

Preisker, Goble & Twitchell for Respondent.

THOMPSON, J.—This action was brought by an architect for a fee claimed to be due him under the terms of a written contract for professional services in connection with the construction of a hotel building. Judgment was rendered for the defendant and the plaintiff has appealed.

More specifically, the contract for the plaintiff's services provided:

"(1) That the Architect is to design a hotel building suitable for the needs of the Owner; is to furnish all necessary preliminary sketches and estimates of cost; is to furnish complete working drawings, specifications and details necessary for the construction of such a hotel building.

(2) The Architect is to supervise all of the work committed to his control. The Architect is to carry all of the necessary administrative work required in the proper keeping of accounts, the issuance of certificates of payment and such superintendence of the work as is hereinafter mentioned. [219 Cal. 441]

(3) The Architect is to keep an inspector acceptable to the Owner on the work during the pouring of concrete or the erection of masonry construction. The cost of such an inspector is to be paid by the Architect.

(4) The Owner agrees that the Architect is to be paid for his services, the sum equal to six per cent of the cost of the work exclusive of the cost of the land, in installments as follows: 1/5 of the total fee based upon the estimated cost on acceptance of preliminary drawings and estimates of cost; on completion of working drawings exclusive of details, a sum sufficient to bring the total payments to 3/5 of the total fee based on the estimated cost or upon the lowest reputable bids for construction; the balance, 2/5, to be in installments as the work progresses."

There was a fifth paragraph which required the owner to pay for surveys and borings and to make prompt statements of his requirements and decisions relating to the conduct of the work.

The plaintiff prepared plans and specifications for a thirty-room hotel which the defendant admits were satisfactory to him. Thereafter bids for its construction were sought and the lowest bid received was something over $61,000. The defendant thereupon abandoned the project because of the excessive cost of construction and refused to pay the plaintiff on the theory that he had failed to perform his part of the contract in the preparation of plans suitable to the needs of the defendant. This action was commenced on the written contract for the sum of $1963.50, 3/5 of the total fee based upon the lowest bid submitted, in accordance with the provisions of paragraph (4) of the contract.

The defendant's answer contained a general denial and, in addition thereto, affirmative allegations of the oral agreement of the plaintiff to prepare plans and specifications for a hotel building which would not cost over $45,000; that the plaintiff failed to design a hotel building "suitable to the needs of the owner" since one of the defendant's known needs was that the cost of construction should not exceed $45,000; and, predicating it upon these same facts, fraud in inducing the defendant to enter into the written contract.

At the trial defendant abandoned the defense of fraud "because proof constituting the elements of fraud was lacking", but the defendant was allowed by the trial court to [219 Cal. 442] introduce parol evidence of the prior conversation, conduct and acts of the parties for the purpose of proving the parol agreement as to the cost of the building. It is the appellant's contention that this evidence was inadmissible except to substantiate the third affirmative defense of fraud, and that, after this defense had been abandoned, it could not properly be considered by either the court or the jury with respect to any of the remaining issues. It is urged as error that the trial court allowed the defendant to add by parol an "entirely new, distinct and independent clause" to the written contract. It is also urged that the defendant's failure to make an affirmative showing and ask for the reformation of the contract on the ground of mistake precluded the introduction of any evidence in support of the omitted clause of the contract.

The appellant further complains of numerous instructions, refusals to give instructions and changes made by the trial court in instructions offered by the plaintiff, which resulted in the jury's being told that they might find that plaintiff and defendant had orally agreed that the plans and specifications were to be prepared for a building, the cost of construction of which was not to exceed $45,000, and, if they further found that the plaintiff had failed to furnish such plans and specifications, the defendant would not be bound to accept the plans and that unless he did accept or make use of them he would not be liable for the plaintiff's services. One such instruction was as follows:

"If you find that the plaintiff agreed to design a building so that the cost thereof should not exceed $45,000, there is the implied agreement that the architect cannot recover unless he performs his contract in this respect, and it is not necessary in order to produce this result that the parties should expressly agree that the architect should receive no pay in the event that he failed to perform this part of the agreement."

The one question to be determined upon this appeal is whether it was proper to permit defendant to show the oral agreement limiting the cost of construction. Its solution depends upon whether the case can be said to come within one of the recognized exceptions to the parol evidence rule upon which the appellant relies. Although a contract has been reduced to writing by the parties, parol evidence is admissible to show fraud, accident or mistake, to show [443] the omitted portion of the contract where the writing is incomplete on its face, and to clear up an ambiguity or uncertainty. (Ayers v. Southern Pac. R. R. Co., 173 Cal. 74, 81 [159 Pac. 144, L. R. A. 1917F, 949]; and see note, 70 A. L. R. 752, collecting cases.)

This evidence was offered to complete the written contract by adding a term which was obviously omitted and with which the appellant admittedly had not complied. The written contract was entirely silent as to cost of construction the only subject which it covered with any degree of thoroughness being the architect's fees and the manner of their payment, which fees, however, could not be determined until the estimated cost was ascertained.

“It has long been the rule that when parties have not incorporated into an instrument all of the terms of their contract evidence is admissible to prove the existence of a separate oral agreement as to any matter on which the document is silent and which is not inconsistent with its terms. . . . "

(Buckner v. Leon & Co., 204 Cal. 225, 227 [267 Pac. 693].) Where it appears upon the face of the writing that it is incomplete, parol evidence may be received for the purpose of  supplying the missing matter. "If the writing does not show upon its face it was intended to express the whole agreement between the parties, parol evidence is admissible to show other conditions or explain latent ambiguities. (Kreuzberger v. Wingfield, 96 Cal. 255 [31 Pac. 109]; Sivers v. Sivers, 97 Cal. 521 [32 Pac. 571]; Balfour v. Fresno Canal etc. Co: 109 Cal. 221 [41 Pac. 876].)" (Williams v. Ashurst Oil etc. Co., 144 Cal. 619, 624 [78 Pac. 28]; Stephan v. Lagerqvest, 52 Cal. App. 519, 523 [199 Pac. 52]; Hudson v. Barneson, 41 Cal. App. 633 [183 Pac. 274].)

Despite the greater formality of the contract in this case, we consider that Hudson v. Barneson, supra, is determined on the question of the completeness of this instrument for the purpose of excluding all oral agreements. The same question was there involved and it arose upon an almost identical set of facts, the contract being evidenced by correspondence between the parties. It was there said, page 636:  

"Appellants contend that the confirmation of that letter by the defendant bound him to pay to the plaintiffs the agreed percentage upon whatever might be the entire estimated cost of any residence and garage which [219 Cal. 444] plaintiffs might plan. Respondent, on the other hand, insists that the amount to be paid plaintiffs could not be determined without a prior determination of the cost of the buildings, and as that cost was nowhere stated in the writings, it was an element of the contract omitted therefrom. In our opinion, the trial court did not err in construing the contract in accordance with respondent's contention. Disregarding the improvident nature of such a contract as appellants' construction would make of the one here involved, it is manifest that the plaintiffs' commissions could not be computed from the terms of the written contract alone. This shows its incompleteness. A necessary element of plaintiffs' cause of action was the cost of the buildings. Plaintiffs could not object to evidence on the part of defendant as to the amount of such cost upon the ground that the entire contract was included in the writings, while the necessities of their own case compelled them to adopt a like course to supply the same omitted portion of the contract. It cannot be held, therefore, that the letter imports on its face to be a complete expression of the whole agreement."

In addition it is to be noted that there exists an uncertainty upon the face of the contract. In paragraph (1) It is provided that "the Architect is to design a hotel building suitable for the needs of the Owner". Those needs are in no way described in the written contract. Obviously there must have been some discussion and agreement as to the size, type and style of the building to be planned and erected, and the cost of construction must almost necessarily have been inseparably connected with any discussion of such questions. This is such an uncertainty as may be cleared up by parol evidence as to the nature and character of the building which, within the contemplation and understanding of the parties at the time of the execution of the written contract, would be "suitable for the needs of the Owner". That its cost was a material factor seems to me to admit of no doubt. In Blahnik v. Small Farms Improvement Co., 181 Cal. 379 [184 Pac. 661], the contract, for the purchase and sale of a piece of realty, provided: "The seller agrees that it will have the roads in said subdivision 'R' constructed during the fall of 1913 after the rains or when the ground is able to be worked. And construct the [219 Cal. 445] necessary bridges." The action was for rescission and recovery of the cash payment for failure of the vendor to construct the roads referred to in the contract. Some bridges and approaches having been constructed before the attempted rescission, the issue was the performance of the vendor. With regard to the exclusion by the trial court of conversations had between the parties before and at the time of the execution of the contract and offered for the purpose of showing the real agreement of the parties in that respect, the court said, page 382: "This ruling was erroneous. The contract was altogether silent in regard to the character and kind of work that was to be done upon the roads. If there was any agreement on that subject, or any plan relating thereto adopted by defendant and acquiesced in by the plaintiffs, it was not set forth in the contract. So far as appears it was in parol only. Such an agreement would be collateral and supplemental to the contract contained in the writing, and, as parol evidence thereof would not be inconsistent with the contract and would not alter it in any respect, evidence thereof would be admissible if material to the issues.(Sivers v. Sivers, 97 Cal. 521 [32 Pac. 571]; Daly v. Ruddell,137 Cal. 676 [70 Pac. 784]; 17 Cyc. 741.)" In Rohan v. Proctor, 61 Cal. App. 447 [214 Pac. 986], where the lease provided that alterations were to be made before the tenant should enter but did not contain a definite description of what the improvements were to consist or a definite date for their completion, and so was uncertain as to the time when the term was to begin, it was held that this was such an uncertainty as could be cleared up by parol evidence as to the kind and character of alterations and improvements within the understanding and contemplation of the parties at the time of the execution of the contract. However, the complaint therein expressly' alleged that the agreement with regard to the nature of the changes to be made in the premises was arrived at subsequent to the execution of the contract. (See, also, Austin v. Bullion, 77 Cal. App. 257 [246 Pac. 151]; Lewis Publishing Co. v. Henderson, 103 Cal. App. 425 [284 Pac. 713].) We consequently conclude that there was no error in the admission by the trial court of the testimony complained of and that such evidence was relevant to the issue of the appellant's performance.

[219 Cal. 446] Appellant's contention that the respondent should have sought affirmative relief through reformation of the contract for mutual mistake is beside the point, since it was never urged that the written contract was not in accordance with the real agreement of the parties, but rather that the whole of the agreement was not reduced to writing.

The judgment is affirmed.

Curtis, J., Preston, J., Seawell, J., Waste, C. J., and Langdon, J., concurred.

247 N. Y. 377
CATHERINE C. MITCHILL, Respondent,
v.
CHARLES LATH et al., Appellants.

[378] 

Mitchell v Lath, 220 App. Div. 776, reversed.

(Argued January 10, 1928; decided February 14, 1928.)

APPEAL, by permission, from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered May 27, 1927, unanimously affirming a judgment in favor of plaintiff entered upon a decision of the court on trial at Special Term in an action to compel specific performance of an alleged contract to remove an ice house.

James G. Meyer, John T. Kelly and Daniel A. Dugan for appellants. The court erred in destroying the contract by receiving evidence of prior negotiations. (Newburger v. Am. Surety Co., 242 N. Y. 134; Filkins v. Whyland, 24 N. Y. 338; Eighmie v. Taylor, 98 N. Y. 288; Emmett v. Penoyer, 151 N. Y. 564; Sturmdorf v. Saunders, 117 App. Div. 762; Marsh v. McNair, 99 N. Y. 174; Lossing v. Cushman, 123 App. Div. 693; 195 N. Y. 386.) The case at bar is not within the exceptions to the general rule that evidence of parol agreements may not be received to contradict or vary the terms of an instrument in writing. (Thomas v. Scutt, 127 N. Y. 133; House v. Walch, 144 N. Y. 418; Mead v. Dunleavy, 174 N. Y. 108; Studwell v. Bush Co., 206 N. Y. 416; Newburger v. American Surety Co., 242 N. Y. 134.)

Arthur H. Haaren for respondent. Specific performance of defendants' oral contract was properly granted below. (Rintelen v. Schaefer, 158 App. Div. 477.) The parol evidence rule has not been violated and no other ground for reversal has been shown. (Newburger v. [379] Am. Surety Co., 242 N. Y. 134; Indelli v. Lesster, 130 App. Div. 548; Finkle v. Lasher, 178 App. Div. 471; Brown v. De Graff, 183 App. Div. 177; Amer. Aniline Products Co. v. Mitsui & Co., 190 App. Div. 485; Taylor v. Hopper, 62 N. Y. 649; Lobel v. Van Hoose, 141 N. Y. Supp. 490; M'Crea v. Purmort, 16 Wend. 460; Hocking Valley Ry. Co. v. Barbour, 192 App. Div. 654; Post v. Thomas, 180 App. Div. 627.) The injunction prayed for was properly granted. (Musgrave v. Sherwood, 23 Hun, 669.)

ANDREWS, J. In the fall of 1923 the Laths owned a farm. This they wished to sell. Across the road, on land belonging to Lieutenant-Governor Lunn, they had an ice house which they might remove. Mrs. Mitchill looked over the land with a view to its purchase. She found the ice house objectionable. Thereupon "the defendants orally promised and agreed, for and in consideration of the purchase of their farm by the plaintiff, to remove the said ice house in the spring of 1924." Relying upon this promise, she made a written contract to buy the property for $8,400, for cash and a mortgage and containing various provisions usual in such papers. Later receiving a deed, she entered into possession and has spent considerable sums in improving the property for use as a summer residence. The defendants have not fulfilled their promise as to the ice house and do not intend to do so. We are not dealing, however, with their moral delinquencies. The question before us is whether their oral agreement may be enforced in a court of equity.

This requires a discussion of the parol evidence rule — a rule of law which defines the limits of the contract to be construed. (Glackin v. Bennett, 226 Mass. 316.) It is more than a rule of evidence and oral testimony even if admitted will not control the written contract (O'Malley v. Grady, 222 Mass. 202), unless admitted without objection. (Brady v. Nolly, 151 N. Y. 258.) It applies, however, to attempts to modify such a contract by parol. It does not [380] affect a parol collateral contract distinct from and independent of the written agreement. It is, at times, troublesome to draw the line. Williston, in his work on Contracts (sec. 637) points out the difficulty. "Two entirely distinct contracts," he says, 

“each for a separate consideration may be made at the same time and will be distinct legally. Where, however, one agreement is entered into wholly or partly in consideration of the simultaneous agreement to enter into another, the transactions are necessarily bound together. . . . Then if one of the agreements is oral and the other is written, the problem arises whether the bond is sufficiently close to prevent proof of the oral agreement."

That is the situation here. It is claimed that the defendants are called upon to do more than is required by their written contract in connection with the sale as to which it deals.

The principle may be clear, but it can be given effect by no mechanical rule. As so often happens, it is a matter of degree, for as Professor Williston also says where a contract contains several promises on each side it is not difficult to put any one of them in the form of a collateral agreement. If this were enough written contracts might always be modified by parol. Not form, but substance is the test.

In applying this test the policy of our courts is to be considered. We have believed that the purpose behind the rule was a wise one not easily to be abandoned. Notwithstanding injustice here and there, on the whole it works for good. Old precedents and principles are not to be lightly cast aside unless it is certain that they are an obstruction under present conditions. New York has been less open to arguments that would modify this particular rule, than some jurisdictions elsewhere. Thus in Eighmie v. Taylor (98 N. Y. 288) it was held that a parol warranty might not be shown although no warranties were contained in the writing.

Under our decisions before such an oral agreement [381] as the present is received to vary the written contract at least three conditions must exist, (1) the agreement must in form be a collateral one; (2) it must not contradict express or implied provisions of the written contract; (3) it must be one that parties would not ordinarily be expected to embody in the writing; or put in another way, an inspection of the written contract, read in the light of surrounding circumstances must not indicate that the writing appears "to contain the engagements of the parties, and to define the object and measure the extent of such engagement." Or again, it must not be so clearly connected with the principal transaction as to be part and parcel of it.

The respondent does not satisfy the third of these requirements. It may be, not the second. We have a written contract for the purchase and sale of land. The buyer is to pay $8,400 in the way described. She is also to pay her portion of any rents, interest on mortgages, insurance premiums and water meter charges. She may have a survey made of the premises. On their part the sellers are to give a full covenant deed of the premises as described, or as they may be described by the surveyor if the survey is had, executed and acknowledged at their own expense; they sell the personal property on the farm and represent they own it; they agree that all amounts paid them on the contract and the expense of examining the title shall be a lien on the property; they assume the risk of loss or damage by fire until the deed is delivered; and they agree to pay the broker his commissions. Are they to do more? Or is such a claim inconsistent with these precise provisions? It could not be shown that the plaintiff was to pay $500 additional. Is it also implied that the defendants are not to do anything unexpressed in the writing?

That we need not decide. At least, however, an inspection of this contract shows a full and complete agreement, setting forth in detail the obligations of each [382] party. On reading it one would conclude that the reciprocal obligations of the parties were fully detailed. Nor would his opinion alter if he knew the surrounding circumstances. The presence of the ice house, even the knowledge that Mrs. Mitchill thought it objectionable would not lead to the belief that a separate agreement existed with regard to it. Were such an agreement made it would seem most natural that the inquirer should find it in the contract. Collateral in form it is found to be, but it is closely related to the subject dealt with in the written agreement — so closely that we hold it may not be proved.

Where the line between the competent and the incompetent is narrow the citation of authorities is of slight use. Each represents the judgment of the court on the precise facts before it. How closely bound to the contract is the supposed collateral agreement is the decisive factor in each case. But reference may be made to Johnson v. Oppenheim (55 N. Y. 280, 292); Thomas v. Scutt (127 N. Y. 133); Eighmie v. Taylor (98 N. Y. 288); Stowell v. Greenwich Ins. Co. (163 N. Y. 298); Newburger v. American Surety Co. (242 N. Y. 134); Love v. Hamel (59 App. Div. 360); Daly v. Piza (105 App. Div. 496) ; Seitz v. Brewers Refrigerating Co. (141 U.S. 510); American Locomotive Co. v. Nat. Grocery Co. (226 Mass. 314); Doyle v. Dixon (12 Allen, 576). Of these citations, Johnson v. Oppenheim and the two in the Appellate Division relate to collateral contracts said to have been the inducing cause of the main contract. They refer to leases. A similar case is Wilson v. Deen (74 N. Y. 531). All hold that an oral stipulation, said to have been the inducing cause for the subsequent execution of the lease itself, concerning some act to be done by the landlord, or some condition as to the leased premises, might not be shown. In principle they are not unlike the case before us. Attention should be called also to Taylor v. Hopper (62 N. Y. 649), where it is assumed that evidence [383] of a parol agreement to remove a barn, which was an inducement to the sale of lots, was improper.

We do not ignore the fact that authorities may be found that would seem to support the contention of the appellant. Such are Erskine v. Adeane (L. R. 8 Ch. App. 756) and Morgan v. Griffith (L. R. 6 Exch. 70), where although there was a written lease a collateral agreement of the landlord to reduce the game was admitted. In this State Wilson v. Deen might lead to the contrary result. Neither are they approved in New Jersey (Naumberg v. Young, 15 Vroom, 331). Nor in view of later cases in this court can Batterman v. Pierce (3 Hill, 171) be considered an authority. A line of cases in Massachusetts, of which Durkin v. Cobleigh (156 Mass. 108) is an example, have to do with collateral contracts made before a deed is given. But the fixed form of a deed makes it inappropriate to insert collateral agreements, however closely connected with the sale. This may be cause for an exception. Here we deal with the contract on the basis of which the deed to Mrs. Mitchill was given subsequently, and we confine ourselves to the question whether its terms may be modified.

Finally there is the case of Chapin v. Dobson (78 N. Y. 74, 76). This is acknowledged to be on the border line and is rarely cited except to be distinguished. Assuming the premises, however, the court was clearly right. There was nothing on the face of the written contract, it said, to show that it intended to express the entire agreement. And there was a finding, sustained by evidence, that there was an entire contract, only part of which was reduced to writing. This being so, the contract as made might be proved.

It is argued that what we have said is not applicable to the case as presented. The collateral agreement was made with the plaintiff. The contract of sale was with her husband and no assignment of it from him appears. Yet the deed was given to her. It is evident that here [384] was a transaction in which she was the principal from beginning to end. We must treat the contract as if in form, as it was in fact, made by her.

Our conclusion is that the judgment of the Appellate Division and that of the Special Term should be reversed and the complaint dismissed, with costs in all courts.

LEHMAN, J. (dissenting). I accept the general rule as formulated by Judge ANDREWS. I differ with him only as to its application to the facts shown in the record. The plaintiff contracted to purchase land from the defendants for an agreed price. A formal written agreement was made between the sellers and the plaintiff's husband. It is on its face a complete contract for the conveyance of the land. It describes the property to be conveyed. It sets forth the purchase price to be paid. All the conditions and terms of the conveyance to be made are clearly stated. I concede at the outset that parol evidence to show additional conditions and terms of the conveyance would be inadmissible. There is a conclusive presumption that the parties intended to integrate in that written contract every agreement relating to the nature or extent of the property to be conveyed, the contents of the deed to be delivered, the consideration to be paid as a condition precedent to the delivery of the deeds, and indeed all the rights of the parties in connection with the land. The conveyance of that land was the subject-matter of the written contract and the contract completely covers that subject.

The parol agreement which the court below found the parties had made was collateral to, yet connected with, the agreement of purchase and sale. It has been found that the defendants induced the plaintiff to agree to purchase the land by a promise to remove an ice house from land not covered by the agreement of purchase and sale. No independent consideration passed to the defendants for the parol promise. To that extent the written [385] contract and the alleged oral contract are bound together. The same bond usually exists wherever attempt is made to prove a parol agreement which is collateral to a written agreement. Hence "the problem arises whether the bond is sufficiently close to prevent proof of the oral agreement." See Judge ANDREWS’ citation from Williston on Contracts, section 637.

Judge ANDREWS has formulated a standard to measure the closeness of the bond. Three conditions, at least, must exist before an oral agreement may be proven to increase the obligation imposed by the written agreement. I think we agree that the first condition that the agreement "must in form be a collateral one" is met by the evidence. I concede that this condition is met in most cases where the courts have nevertheless excluded evidence of the collateral oral agreement. The difficulty here, as in most cases, arises in connection with the two other conditions. The second condition is that the "parol agreement must not contradict express or implied provisions of the written contract." Judge ANDREWS voices doubt whether this condition is satisfied. The written contract has been carried out. The purchase price has been paid; conveyance has been made, title has passed in accordance with the terms of the written contract. The mutual obligations expressed in the written contract are left unchanged by the alleged oral contract. When performance was required of the written contract, the obligations of the parties were measured solely by its terms. By the oral agreement the plaintiff seeks to hold the defendants to other obligations to be performed by them thereafter upon land which was not conveyed to the plaintiff. The assertion of such further obligation is not inconsistent with the written contract unless the written contract contains a provision, express or implied, that the defendants are not to do anything not expressed in the writing. Concededly there is no such express provision in the [386] contract, and such a provision may be implied, if at all, only if the asserted additional obligation is "so clearly connected with the principal transaction as to be part and parcel of it," and is not "one that the parties would not ordinarily be expected to embody in the writing." The hypothesis so formulated for a conclusion that the asserted additional obligation is inconsistent with an implied term of the contract is that the alleged oral agreement does not comply with the third condition as formulated by Judge ANDREWS. In this case, therefore, the problem reduces itself to the one question whether or not the oral agreement meets the third condition.

I have conceded that upon inspection the contract is complete. "It appears to contain the engagements of the parties, and to define the object and measure the extent of such engagement;" it constitutes the contract between them and is presumed to contain the whole of that contract. (Eighmie v. Taylor, 98 X. Y. 288.) That engagement was on the one side to convey land; on the other to pay the price. The plaintiff asserts further agreement based on the same consideration to be performed by the defendants after the conveyance was complete, and directly affecting only other land. It is true, as Judge ANDREWS points out, that "the presence of the ice house, even the knowledge that Mrs. Mitchill thought it objectionable, would not lead to the belief that a separate agreement existed with regard to it;" but the question we must decide is whether or not, assuming an agreement was made for the removal of an unsightly ice house from one parcel of land as an inducement for the purchase of another parcel, the parties would ordinarily or naturally be expected to embody the agreement for the removal of the ice house from one parcel in the written agreement to convey the other parcel. Exclusion of proof of the oral agreement on the ground that it varies the contract embodied in the [387] writing may be based only upon a finding or presumption that the written contract was intended to cover the oral negotiations for the removal of the ice house which lead up to the contract of purchase and sale. To determine what the writing was intended to cover

"the document alone will not suffice. What it was intended to cover cannot be known till we know what there was to cover. The question being whether certain subjects of negotiation were intended to be covered, we must compare the writing and the negotiations before we can determine whether they were in fact covered."

(Wigmore on Evidence [2d ed.], section 2430.)

The subject-matter of the written contract was the conveyance of land. The contract was so complete on its face that the conclusion is inevitable that the parties intended to embody in the writing all the negotiations covering at least the conveyance. The promise by the defendants to remove the ice house from other land was not connected with their obligation to convey, except that one agreement would not have been made unless the other was also made. The plaintiff's assertion of a parol agreement by the defendants to remove the ice house was completely established by the great weight of evidence. It must prevail unless that agreement was part of the agreement to convey and the entire agreement was embodied in the writing.

The fact that in this case the parol agreement is established by the overwhelming weight of evidence is, of course, not a factor which may be considered in determining the competency or legal effect of the evidence. Hardship in the particular case would not justify the court in disregarding or emasculating the general rule. It merely accentuates the outlines of our problem. The assumption that the parol agreement was made is no longer obscured by any doubts. The problem then is clearly whether the parties are presumed to have intended to render that parol agreement legally ineffective [388] and non-existent by failure to embody it in the writing. Though we are driven to say that nothing in the written contract which fixed the terms and conditions of the stipulated conveyance suggests the existence of any further parol agreement, an inspection of the contract, though it is complete on its face in regard to the subject of the conveyance, does not, I think, show that it was intended to embody negotiations or agreements, if any, in regard to a matter so loosely bound to the conveyance as the removal of an ice house from land not conveyed.

The rule of integration undoubtedly frequently prevents the assertion of fraudulent claims. Parties who take the precaution of embodying their oral agreements in a wilting should be protected against the assertion that other terms of the same agreement were not integrated in the writing. The limits of the integration are determined by the writing, read in the light of the surrounding circumstances. A written contract, however complete, yet covers only a limited field. I do not think that in the written contract for the conveyance of land here under consideration we can find an intention to cover a field so broad as to include prior agreements, if any such were made, to do other acts on other property after the stipulated conveyance was made.

In each case where such a problem is presented, varying factors enter into its solution. Citation of authority in this or other jurisdictions is useless, at least without minute analysis of the facts. The analysis I have made of the decisions in this State leads me to the view that the decision of the courts below is in accordance with our own authorities and should be affirmed.

CARDOZO, Ch. J., POUND, KELLOGG and O'BRIEN, JJ., concur with ANDREWS, J.; LEHMAN, J., dissents in opinion in which CRANE, J., concurs.

Judgment accordingly.

184 N.Y.S.2d 599
5 N.Y.2d 317, 157 N.E.2d 597

DANANN REALTY CORP., Respondent,
v.
David A. HARRIS et al., Appellants.

Court of Appeals of New York.
March 5, 1959.

[184 N.Y.S.2d 600] [157 N.E.2d 598] [5 N.Y.2d 318] George E. Netter, Morris A. Marks and Milton Waxenfeld, New York City, for appellants.

David Haar, New York City, for respondent.

[5 N.Y.2d 319] BURKE, Judge.

The plaintiff in its complaint alleges, insofar as its first cause of action is concerned, that it was induced to enter into a contract of sale of a lease of a building held by defendants because of oral representations, falsely made by the defendants, as to the operating expenses of the building and as to the profits to be derived from the investment. Plaintiff, affirming the contract, seeks damages for fraud.

[184 N.Y.S.2d 601] At Special Term, the Supreme Court sustained a motion to dismiss the complaint. On appeal, the Appellate Division unanimously reversed the order granting the dismissal of the complaint. Thereafter the Appellate Division granted leave to appeal, certifying the following question: “Does the first cause of action in the complaint state facts sufficient to constitute a cause of action?”

The basic problem presented is whether the plaintiff can possibly establish from the facts alleged in the complaint (together with the contract which was annexed to the complaint) reliance upon the misrepresentations (Cohen v. Cohen, 1 A.D.2d 586, 151 N.Y.S.2d 949, affirmed 3 N.Y.2d 813, 166 N.Y.S.2d 10).

We must, of course, accept as true plaintiff's statements that during the course of negotiations defendants misrepresented the operating expenses and profits. Such misrepresentations are undoubtedly material. However, the provisions of the written contract which directly contradict the allegations of oral representations are of equal importance in our task of reaching a decisive answer to the question posed in these cases.

[5 N.Y.2d 320] The contract, annexed to and made a part of the complaint, contains the following language pertaining to the particular facts of representations:

"The Purchaser has examined the premises agreed to be sold and is familiar with the physical condition thereof. The Seller has not made and does not make any representations as to the physical condition, rents, leases, expenses, operation or any other matter or thing affecting or related to the aforesaid premises, except as herein specifically set forth, and the Purchaser hereby expressly acknowledges that no such representations have been made, and the Purchaser further acknowledges that it has inspected the premises and agrees to take the premises 'as is' . . . It is understood and agreed that all understandings and agreements heretofore had between the parties hereto are merged in this contract, which alone fully and completely expresses their agreement, and that the same is entered into after full investigation, neither party relying upon any statement or representation, not embodied in this contract, made by the other. The Purchaser has inspected the buildings standing on said premises and is thoroughly acquainted with their condition." (Emphasis supplied.)

Were we dealing solely with a general and vague merger clause, our task would be simple. A reiteration of the fundamental principle that a general merger clause is ineffective to exclude parol evidence to show fraud in inducing the contract would then be dispositive of the issue (Sabo v. Delman, 3 N.Y.2d 155, 164 N.Y.S.2d 714). To put it another way, where the complaint states a cause of action for fraud, the parol evidence rule is not a bar to showing the fraud either in [184 N.Y.S.2d 602] the inducement or in the execution despite an omnibus statement that the written instrument embodies the [157 N.E.2d 599] whole agreement, or that no representations have been made. Bridger v. Goldsmith, 143 N.Y. 424, 38 N.E. 458; Angerosa v. White Co., 248 App.Div. 425, 290 N.Y.S. 204, affirmed 275 N.Y. 524, 11 N.E.2d 325; Jackson v. State of New York, 210 App.Div. 115, 205 N.Y.S. 658, affirmed 241 N.Y. 563, 150 N.E. 566; 3 Williston, Contracts (Rev. ed.), § 811A.

Here, however, plaintiff has in the plainest language announced and stipulated that it is not relying on any representations as to the very matter as to which it now claims it was defrauded. Such a specific disclaimer destroys the allegations in plaintiff's complaint that the agreement was executed in reliance [5 N.Y.2d 321] upon these contrary oral representations (Cohen v. Cohen, supra). The Sabo case, supra, dealt with the usual merger clause. The present case, as the Cohen case, additionally, includes a disclaimer as to specific representations.

This specific disclaimer is one of the material distinctions between this case and Bridger v. Goldsmith, supra, and Crowell-Collier Pub. Co. v. Josefowitz, 5 N.Y.2d 998, 184 N.Y.S.2d 859. In the Bridger case, the court considered the effect of a general disclaimer as to representations in a contract of sale, concluding that the insertion of such a clause at the insistence of the seller cannot be used as a shield to protect him from his fraud. Another material distinction is that nowhere in the contract in the Bridger case is there a denial of reliance on representations, as there is here. Similarly, in Crowell-Collier Pub. Co. v. Josefowitz, supra, only a general merger clause was incorporated into the contract of sale. Moreover, the complaint there additionally alleged that further misrepresentations were made after the agreement had been signed, but while the contract was held in escrow and before it had been finally approved.

Consequently, this clause, which declares that the parties to the agreement do not rely on specific representations not embodied in the contract, excludes this case from the scope of the Jackson, Angerosa, Bridger and Crowell-Collier cases, supra. See Foundation Co. v. State of New York, 233 N.Y. 177, 135 N.E. 236.

The complaint here contains no allegations that the contract was not read by the purchaser. We can fairly conclude that plaintiff's officers read and understood the contract, and that they were aware of the provision by which they aver that plaintiff did not rely on such extra-contractual representations. It is not alleged that this provision was not understood, or that the provision itself was procured by fraud. It would be unrealistic to ascribe to plaintiff's officers such incompetence that they did not understand what they read and signed. Cf. Ernst Iron Works v. Duralith Corp., 270 N.Y. 165, 171, 200 N.E. 683, 685. [184 N.Y.S.2d 603] Although this court in the Ernst case discounted the merger clause as ineffective to preclude proof of fraud, it gave effect to the specific disclaimer of representation clause, holding that such a clause limited the authority of the agent, and hence, [5 N.Y.2d 322] plaintiff had notice of his lack of authority. But the larger implication of the Ernst case is that, where a person has read and understood the disclaimer of representation clause, he is bound by it. The court rejected, as a matter of law, the allegation of plaintiffs “that they relied upon an oral statement made to them in direct contradiction of this provision of the contract.” The presence of such a disclaimer clause “is inconsistent with the contention that plaintiff relied upon the misrepresentation, and was led thereby to make the contract.” Kreshover v. Berger, 135 App.Div. 27, 28, 119 N.Y.S. 737, 738.

It is not necessary to distinguish seriatim the cases in other jurisdictions as they are not, in the main, in point or in, a few instances, clash with the rule followed in the State of New York. The marshaling of phrases plucked from various opinions and references to generalizations, with which no one disagrees, cannot subvert the fundamental precept that the asserted [157 N.E.2d 600] reliance must be found to be justifiable under all the circumstances before a complaint can be found to state a cause of action in fraud. We must keep in mind that "opinions must be read in the setting of the particular cases and as the product of preoccupation with their special facts" (Freeman v. Hewit, 329 U.S. 249, 252, 67 S.Ct. 274, 276, 91 L.Ed. 265). When the citations are read in the light of this caveat, we find that they are generally concerned with factual situations wherein the facts represented were matters peculiarly within the defendant's knowledge, as in the cases of Sabo v. Delman, supra, and Jackson v. State of New York, supra.

The general rule was enunciated by this court over a half a century ago in Schumaker v. Mather, 133 N.Y. 590, 596, 30 N.E. 755, 757, that “if the facts represented are not matters peculiarly within the party's knowledge, and the other party has the means available to him of knowing, by the exercise of ordinary intelligence, the truth, or the real quality of the subject of the representation, he must make use of those means, or he will not be heard to complain that he was induced to enter into the transaction by misrepresentations. (Baily v. Merrell, Bulstrode's Rep.Part III, p. 94; Slaughter's Adm'r v. Gerson, 13 Wall. (379) 383, 20 L.Ed. 627; Chrysler v. Canaday, 90 N.Y. 272.)”

Very recently this rule was approved as settled law by this court in the case of Sylvester v. Bernstein, 283 App.Div. 333, 127 N.Y.S.2d 746, affirmed 307 N.Y. 778, 121 N.E.2d 616.

[184 N.Y.S.2d 604] [5 N.Y.2d 323] In this case, of course, the plaintiff made a representation in the contract that it was not relying on specific representations not embodied in the contract, while, it now asserts, it was in fact relying on such oral representations. Plaintiff admits then that it is guilty of deliberately misrepresenting to the seller its true intention. To condone this fraud would place the purchaser in a favored position. Cf. Riggs v. Palmer, 115 N.Y. 506, 511, 512, 22 N.E. 188, 190, 5 L.R.A. 340. This is particularly so, where, as here, the purchaser confirms the contract, but seeks damages. If the plaintiff has made a bad bargain he cannot avoid it in this manner.

If the language here used is not sufficient to estop a party from claiming that he entered the contract because of fraudulent representations, then no language can accomplish that purpose. To hold otherwise would be to say that it is impossible for two businessmen dealing at arm's length to agree that the buyer is not buying in reliance on any representations of the seller as to a particular fact.

Accordingly, the order of the Appellate Division should be reversed and that of Special Term reinstated, without costs. The question certified should be answered in the negative.

FULD, Judge. (dissenting). If a party has actually induced another to enter into a contract by means of fraud and so the complaint before us alleges I conceive that language may not be devised to shield him from the consequences of such fraud. The law does not temporize with trickery or duplicity, and this court, after having weighed the advantages of certainty in contractual relations against the harm and injustice which result from fraud, long ago unequivocally declared that “a party who has perpetrated a fraud upon his neighbor may (not) contract with him, in the very instrument by means of which it was perpetrated, for immunity against its consequences, close his mouth from complaining of it, and bind him never to seek redress. Public policy and morality are both ignored if such an agreement can be given effect in a court of justice. The maxim that fraud vitiates every transaction would no longer be the rule, but the exception.” Bridger v. Goldsmith, 143 N.Y. 424, 428, 38 N.E. 458, [157 N.E.2d 601] 459. It was a concern for similar considerations of policy which persuaded Massachusetts to repudiate the contrary rule which it had initially espoused. The [5 N.Y.2d 324] same public policy that in general sanctions the avoidance of a promise obtained by deceit, wrote that state's Supreme Judicial Court in Bates v. Southgate, (308 Mass. 170, 182), 31 N.E.2d 551, 558, 133 A.L.R. 1349, “strikes down all attempts to circumvent that policy by means of contractual devices. In the realm of fact it is [184 N.Y.S.2d 605] entirely possible for a party knowingly to agree that no representations have been made to him, while at the same time believing and relying upon representations which in fact have been made and in fact are false but for which he would not have made the agreement. To deny this possibility is to ignore the frequent instances in everyday experience where parties accept . . . and act upon agreements containing . . . exculpatory clauses in one form or another, but where they do so, nevertheless, in reliance upon the honesty of supposed friends, the plausible and disarming statements of salesmen, or the customary course of business. To refuse relief would result in opening the door to a multitude of frauds and in thwarting the general policy of the law.”

It is impossible, on either principle or reasoning, to distinguish the present case from the many others which this court has decided. See, e. g., Bridger v. Goldsmith, 143 N.Y. 424, 428, 38 N.E. 458, 459, supra; Jackson v. State of New York, 210 App.Div. 115, 205 N.Y.S. 658, affirmed 241 N.Y. 563, 150 N.E. 556; Ernst Iron Works v. Duralith Corp., 270 N.Y. 165, 169, 200 N.E. 683; Angerosa v. White Co., 248 App.Div. 425, 431, 290 N.Y.S. 204, 213, affirmed 275 N.Y. 524, 11 N.E.2d 325; Sabo v. Delman, 3 N.Y.2d 155, 162, 164 N.Y.S.2d 714, 718; Crowell-Collier Pub. Co. v. Josefowitz, 5 N.Y.2d 998, 184 N.Y.S.2d 859. As far back as 1894, we decided, in the Bridger case, 143 N.Y. 424, 38 N.E. 458, 459, supra, that the plaintiff was not prevented from bringing an action for fraud, based on oral misrepresentations, even though the written contract provided that it was “understood and agreed” that the defendant seller had not made, “for the purpose of inducing the sale . . . or the making of this agreement, any statements or representations . . . other than” the single one therein set forth (143 N.Y. at pages 426-427, 38 N.E. at page 459). And, just today, we are holding, in the Crowell-Collier Publishing case, that the plaintiffs were not barred from suing the defendants for fraud in inducing them to make the contract, despite its recital that [5 N.Y.2d 325] “This Agreement constitutes the entire understanding between the parties, (and) was not induced by any representations . . . not herein contained.”

In addition, in Jackson v. State of New York, 210 App.Div. 115, 205 N.Y.S. 658, affirmed 241 N.Y. 563, 150 N.E. 556, supra, the contract provided that the contract (plaintiff's predecessor in interest) agreed that he had satisfied himself by his own investigation regarding all the conditions of the work to be done and that his conclusion to enter into the contract was based solely upon such investigation [184 N.Y.S.2d 606] and not upon any information or data imparted by the State.

It was held that even this explicit disavowal of reliance did not bar the plaintiff from recovery. In answering the argument that the provision prevented proof either of misrepresentation by the defendant or reliance on the part of the plaintiff, the Appellate Division, in an opinion approved by this court, wrote:

“A party to a contract cannot, by misrepresentation of a material fact, induce the other party to the contract to enter into it to his damage, and then protect himself from the legal effect of such misrepresentation by inserting in the [157 N.E.2d 602] contract a clause to the effect that he is not to be held liable for the misrepresentation which induced the other party to enter into the contract. The effect of misrepresentation and fraud cannot be thus easily avoided” (210 App.Div. at pages 119-120, 205 N.Y.S. at page 661).

Although the clause in the contract before us may be differently worded from those in the agreements involved in the other cases decided by this court, it undoubtedly reflects the same thought and meaning, and the reasoning and the principles which the court deemed controlling in those cases are likewise controlling in this one. Their application, it seems plain to me, compels the conclusion that the complaint herein should be sustained and the plaintiff accorded a trial of its allegations.

It is said, however, that the provision in this contract differs from those heretofore considered in that it embodies a specific and deliberate exclusion of a particular subject. The quick answer is that the clause now before us is not of such a sort. On the contrary, instead of being limited, it is all-embracing, encompassing every representation that a seller could possibly make about the property being sold and, instead of representing [5 N.Y.2d 326] a special term of a bargain, is essentially "boiler plate." See Contract of Sale, Standard N.Y.B.T.U. Form 8041; Bicks, Contracts for the Sale of Realty (1956 ed.), pp. 79-80, 94-95. The more elaborate verbiage in the present contract cannot disguise the fact that the language which is said to immunize the defendants from their own fraud is no more specific than the general merger clause in Sabo v. Delman, 3 N.Y.2d 155, 164 N.Y.S.2d 714, supra, and far less specific than the provision dealt with in the Jackson case, 210 App.Div. 115, 205 N.Y.S. 58, affirmed 241 N.Y. 563, 150 N.E. 556, supra, or in Crowell-Collier.

In any event, though, I cannot believe that the outcome of a case such as this, in which the defendant is charged with fraud, should turn on the particular language employed in the contract. As Judge Augustus Hand, writing for the Federal Court of Appeals, observed, “the ingenuity of draftsmen is sure to keep pace with the demands of wrongdoers, and if a deliberate fraud may be shielded by a clause in a contract that the [184 N.Y.S.2d 607] writing contains every representation made by way of inducement, or that utterances shown to be untrue were not an inducement to the agreement,” a fraudulent seller would have a simple method of obtaining immunity for his misconduct. Arnold v. National Aniline & Chem. Co., 2 Cir., 20 F.2d 364, 369.

The guiding rule that fraud vitiates every agreement which it touches has been well expressed not only by the courts of this state, but by courts throughout the country and by the House of Lords in England. And, in recognizing that the plaintiff may assert a cause of action in fraud, the courts have not differentiated between the type or form of exculpatory provision inserted in the contract. It matters not, the cases demonstrate, whether the clause simply recites that no representations have been made or more fully stipulates that the seller has not made any representations concerning certain enumerated subjects and that the purchaser has made his own investigation and has not relied upon any representation by the seller, not embodied in the writing. See, e. g., Sabo v. Delman, 3 N.Y.2d 155, 161-162, 164 N.Y.S.2d 714, 717-718, supra; Ernst Iron Works v. Duralith Corp., 270 N.Y. 165, 169, 200 N.E. 683, 684, supra; Bridger v. Goldsmith, 143 N.Y. 424, 428, 38 N.E. 458, 459, supra; Angerosa v. White Co., 248 App.Div. 425, 431, 290 N.Y.S. 204, affirmed 275 N.Y. 524, 11 N.E.2d 325, supra; Jackson v. State of New York, 210 App.Div. 115, 205 N.Y.S. 658, affirmed 241 N.Y. 563, 150 N.E. 556, supra; Pearson [5 N.Y.2d 327] & Son v. Dublin Corp., (1907) A.C. 351, 353-354, 362; Arnold v. National Aniline & Chem. Co., [157 N.E.2d 603] 2 Cir., 20 F.2d 364, 369, supra; Lutfy v. R. D. Roper & Sons Motor Co., 57 Ariz. 495, 506, 115 P.2d 161; Omar Oil & Gas Co. v. MacKenzie Oil Co., 33 Del. 259, 289-290, 138 A. 392; Jordan v. Nelson, Iowa, 178 N.W. 544; Bryant v. Troutman, Ky., 287 S.W.2d 918, 921; Bates v. Southgate, 308 Mass. 170, 182, 31 N.E.2d 551, 133 A.L.R. 1349, supra; Ganley Bros., Inc., v. Butler Bros. Bldg. Co., 170 Minn. 373, 376-377, 212 N.W. 602, 56 A.L.R. 1; Brown v. Ohman, Miss., 42 So.2d 209, 212-213; Martin v. Harris, 121 Neb. 372, 236 N.W. 914; Blacknall v. Rowland, 108 N.C. 554, 557-558, 13 S.E. 191; Pennsylvania Turnpike Comm. v. Smith, 350 Pa. 355, 361-362, 39 A.2d 139; Dallas Farm Mach. Co. v. Reaves, Tex., 307 S.W.2d 233, 239; Dieterich v. Rice, 115 Wash. 365, 197 P. 1; see, also, 3 Williston, Contracts (Rev.ed., 1936), §§ 811, 811A; Corbin, Contracts (1951), Vol. 3, § 578; Vol. 6, § 1516; Restatement of Contracts, § 573.

In England, in the Pearson case, (1907) A.C. 351, supra, the contract to perform certain construction work provided that the contractor “should satisfy himself” as to various specified items connected with the job and that the defendant corporation [184 N.Y.S.2d 608] “did not hold itself responsible for the accuracy of (such) information” (p. 351).

After performing the contract, the plaintiffs brought a deceit action, claiming damages for false representations as to the very items concerning which they had agreed they would satisfy themselves. The House of Lords reversed the judgment directed for the defendants and held that the action could be maintained; the Lord Chancellor, after noting that “The contract contained clauses . . . to the effect that the contractors must not rely on any representation…but must ascertain and judge of the facts for themselves”' (p. 353), went on to say (pp. 353-354):“Now it seems clear that no one can escape liability for his own fraudulent statements by inserting in a contract a clause that the other party shall not rely upon them.” Lord Ashbourne, concurring with the Lord Chancellor, pointed out that the clause relied upon “might in some cases be part of a fraud, and might advance and disguise a fraud” (p. 360) and Lord Hereford, also concurring, declared (p. 362) that, if the “protecting clause” be inserted fraudulently,

[5 N.Y.2d 328] “When the fraud succeeds, surely those who designed the fraudulent protection cannot take advantage of it. Such a clause would be good protection against any mistake or miscalculation, but fraud vitiates every contract and every clause in it.”

In the Dieterich case, 115 Wash. 365, 197 P. 1, supra, the contract contained the provision that

“This land is sold to (the plaintiff buyer) . . . with the understanding that he has personally and carefully inspected said premises, and is purchasing the same by said inspection, and not from any other sayings or inducements by (the seller) . . . and there has been no other inducements other than recited herein.”

Despite this explicit disclaimer of reliance and inducement, the Washington Supreme Court decided that the recital did not bar the plaintiff from showing “the fraudulent nature of the contract” (115 Wash. at page 373, 197 P. at page 3), and, in the course of its opinion, observed (115 Wash. at page 368, 197 P. at page 2) that the contention of the defendants to the contrary was “effectually answered by the Court of Appeals of New York, in the case of Bridger v. Goldsmith, 143 N.Y. 424, 38 N.E. 458.”

In Martin v. Harris, 121 Neb. 372, 236 N.W. 914, 915, supra, the agreement recited:

[184 N.Y.S.2d 609] “There have been no representations of the reasonable value of any of the [157 N.E.2d 604] properties herein described made by or to either party to this contract. Each party is relying upon his own judgment of such values after a personal inspection of the properties.”

The plaintiff, alleging that the defendant fraudulently misrepresented the value of the property, sought damages. Again, despite the explicit statement that such a representation had not been made and the specific disavowal of reliance thereon, the court upheld the plaintiff's right to bring the action (121 Neb. at page 376, 236 N.W. 914).

In the Ganley case, 170 Minn. 373, 212 N.W. 602, supra, too, the disclaimer was quite specific, reading in this way:

“The (plaintiff) contractor has examined the said contracts . . . and the specifications and plans forming a part thereof, and is familiar with the location [5 N.Y.2d 329] of said work and the conditions under which the same must be performed . . . and is not relying upon any statement made by the company in respect thereto.”

In deciding that a defendant could not protect himself against liability for fraud by such a provision or, indeed, by any language, the court wrote in no uncertain terms (170 Minn. at page 377, 212 N.W. at page 603):

“The law should not, and does not, permit a covenant of immunity to be drawn that will protect a person against him own fraud. Such is not enforceable because of public policy. Industrial & General Trust, Ltd. v. Tod, 180 N.Y. 215, 73 N.E. 7. Language is not strong enough to write such a contract. Fraud destroys all consent. It is the purpose of the law to shield only those whose armor embraces good faith. Theoretically, if there is no fraud, the rule we announce is harmless. If there is fraud, the rule we announce is wholesome. Whether the rule is effective depends upon the facts. Public interest supports our conclusion.”

And, said the court, while the argument that a party should have the right “to let his work to a certain person because the other will therein agree that he relies and acts only upon his own knowledge and not upon the representations of his adversary”, might on first thought seem plausible, it does not stand analysis. “It may be desirable in dealing with unscrupulous persons to have this clause as a shield against wrongful charges of fraud. But if there is no fraud that fact will be established on the trial. The merits of defendant's claim reach only the expense and annoyance of litigation. But every party should have his day in court. [184 N.Y.S.2d 610] . . . We are unable to formulate a rule of law sustaining defendant's contention which would not at the same time give opportunities for the commission of fraud for which the wronged party would have no redress” (170 Minn. at page 376, 212 N.W. at page 603).

And in the Lutfy case, 57 Ariz. 495, 115 P.2d 161, 166, supra, the contract of sale contained as specific a disavowal of reliance upon a particular representation as could be written:

“It is understood and agreed that there is no representation or warranty that the 'year model' of said [5 N.Y.2d 330] property, as hereinbefore stated, correctly states the year in which said property was manufactured, but is merely used by the parties hereto for convenience in describing it. . . . Purchaser agrees that he has made an independent investigation of the property and has relied solely upon his own investigation with reference thereto in entering into this contract, and has placed no reliance and acted upon no representations or warranties upon the part of the Seller.”

The plaintiff, suing for damages, alleged that the defendant had falsely represented the year model of the automobile which he purchased, and the high court of Arizona [157 N.E.2d 605] held that he could prove that such a representation had been made and that he had relied upon it, notwithstanding the contract's most explicit recital to the contrary (57 Ariz. at page 506, 115 P.2d at page 166):

“If binding upon (plaintiff) appellant, it would protect appellee, from the consequences of any fraudulent misrepresentations it might have made to appellant to induce him to sign the contract and, as we see it, any provision in a contract making it possible for a party thereto to free himself from the consequences of his own fraud in procuring its execution is invalid and necessarily constitutes no defense.”

The cases cited all upholding the sufficiency of a complaint based on fraud no matter how the exculpatory language in the contract is phrased show how firmly established the rule is, and the passages quoted show how compelling are the reasons for the rule. Nor is their force or value weakened or impaired by the decisions upon which the court now appears to rely. Except for Cohen v. Cohen, 3 N.Y.2d 813, 166 N.Y.S.2d 10, no one of them has anything to do with the adequacy of the complaint as a pleading; two are concerned with the proof adduced at the trial (Schumaker v. Mather, 133 N.Y. 590, 30 N.E. 755; Ernst Iron Works v. Duralith Corp., 270 N.Y. 165, 200 N.E. 683, supra, while the third deals with the subject of res judicata (Sylvester v. Bernstein, 283 App.Div. 333, 127 N.Y.S.2d 746, affirmed 307 N.Y. 778, 121 n.E.2d 616).

[184 N.Y.S.2d 611] In the Ernst Iron Works, case, the appeal was, as I have noted, taken after trial and was concerned with the proof and not, as is the present appeal, with the sufficiency of the complaint. [5 N.Y.2d 331] The contract contained both a blanket merger clause and a recital that the defendant “makes no representation regarding previous sales” (270 N.Y. 165, 200 N.E. 683) in Buffalo, where the plaintiff did business. Notwithstanding that provision, the plaintiff claimed that he had relied upon a representation by the defendant's salesman that the product had not been sold in that city, and testimony to that effect was received at the trial. The court did reverse the judgment for the plaintiff, but not on any theory that the specific disclaimer clause barred suit or that the evidence was inadmissible because of it. It was the court's conclusion, based on the evidence adduced at the trial, first, that the false representation attributed to the defendant had not been made (270 N.Y. at pages 169-170, 200 N.E. 683, 684); second, that, in any event, the defendant's salesman did not have authority to make such a representation and the plaintiff knew this (270 N.Y. at pages 170-171, 200 N.E. 684-685); and, finally, that “it (was) clear (from the proof at the trial) that the plaintiff did not rely upon the statement” (270 N.Y. at pages 171-172, 200 N.E. at page 685). And most significantly, the court did not question the general principle but affirmed it, stating that “A rogue cannot protect himself from liability for his fraud by inserting a printed clause in his contract” (270 N.Y. at page 169, 200 N.E. at page 684.)

As to Cohen v. Cohen (3 N.Y.2d 813, 166 N.Y.S.2d 11) I dissented from the decision there made and still consider it to have been wrongly decided. Constrained to accept it, I do so, but I cannot subscribe to extending its application beyond its own peculiar fact setting. A husband and wife had separated; there were bitter mutual recriminations followed by three separate lawsuits. The parties were ultimately reconciled and their lawyers drew a settlement agreement, which they executed, reciting that the husband had not made any representations “as to the continuation of the marital status.” The wife sometime later brought another action, alleging that her husband had falsely represented that he 'would effect a reconciliation with (her), return to live with her . . . permanently, and permanently resume their [157 N.E.2d 606] marital relationship.” As is quite evident, the Cohen case is a most unusual one not only because it involved an agreement designed to settle pending marital litigation, but because of the extraordinary and promissory nature of the misrepresentation alleged. Indeed, the only resemblance claimed for the cases that is, for Cohen and the present one is that in both [5 N.Y.2d 332] there is a specific disclaimer by the plaintiff of the very representations charged against the defendant. However, as noted above (5 N.Y.2d at pages 325-326, 184 [184 N.Y.S.2d 612] N.Y.S.2d 606), since the provision in the contract before us encompasses every representation which a seller of real estate could possibly have made, including those alleged, even the asserted similarity does not in fact exist.

Contrary to the intimation in the court's opinion (5 N.Y.2d at page 323, 184 N.Y.S.2d 604), the nonreliance clause cannot possibly operate as an estoppel against the plaintiff. Essentially equitable in nature, the principle of estoppel is to be invoked to prevent fraud and injustice, not to further them. The statement that the representations in question were not made was, according to the complaint, false to the defendant's knowledge. Surely, the perpetrator of a fraud cannot close the lips of his victim and deny him the right to state the facts as they actually exist. Indeed, the contention that a person, such as the defendant herein, could urge an estoppel was considered and emphatically disposed of in Bridger v. Goldsmith with this statement:

“The question now is whether (the no-representation non-inducement clause) can be given the effect claimed for it by the learned counsel for the defendant, to preclude the plaintiff from alleging fraud in the sale, and pursuing in the courts the remedies which the law gives in such cases. It cannot operate by way of estoppel, for the obvious reason that the statements were false to the defendant's knowledge. He may, indeed, have relied upon its force and efficacy to protect him from the consequences of his own fraud, but he certainly could not have relied upon the truth of any statement in it. A mere device of the guilty party to a contract, intended to shield himself from the results of his own fraud practiced upon the other party, cannot well be elevated to the dignity and importance of an equitable estoppel.”

(143 N.Y. 424, 427-428, 38 N.E. 458, 459, emphasis supplied; see, also, Angerosa v. White Co., 248 App.Div. 425, 433-434, 290 N.Y.S. 204, 215-216, affirmed 275 N.Y. 524, 11 N.E.2d 325, supra).

The rule heretofore applied by this court presents no obstacle to honest business dealings, and dishonest transactions ought not to receive judicial protection. The clause in the contract before us may lend support to the defense and render the plaintiff's task of establishing its claim more difficult, but it should not be held to bar institution of an action for fraud. Whether [5 N.Y.2d 333] the defendants made the statements attributed to them and, if they did, whether the plaintiff relied upon them, whether, in other words, the defendants were guilty of fraud, are questions of fact not capable of determination on the pleadings alone. The plaintiff in entitled to its day in court.

CONWAY, C. J., and DESMOND, DYE, FROESSEL and VAN VOORHIS, JJ., concur with BURKE, J. FULD, J., dissents in a separate opinion.

Order reversed, etc.

138 F.2d 641 (1943)
ZELL
v.
AMERICAN SEATING CO.,
No. 30.
Circuit Court of Appeals, Second Circuit.
November 4, 1943.

[642] Donovan, Leisure, Newton & Lumbard, of New York City (J. Edward Lumbard, Jr., Theodore S. Hope, Jr., and Phillips S. Trenbath, all of New York City, of counsel), for plaintiff-appellant.

Cravath, de Gersdorff, Swaine & Wood, of New York City (Albert R. Connelly and Harold R. Medina, Jr., both of New York City, of counsel), for defendant-appellee.

Before L. HAND, SWAN, and FRANK, Circuit Judges.

FRANK, Circuit Judge. On defendant's motion for summary judgment, the trial court, after considering the pleadings and affidavits, entered judgment dismissing the action. From that judgment, plaintiff appeals.

On a motion for summary judgment, where the facts are in dispute, a judgment can properly be entered against the plaintiff only if, on the undisputed facts, he has no valid claim; if, then, any fact asserted by the plaintiff is contradicted by the defendant, the facts as stated by the plaintiff must, on such a motion, be taken as true. Accordingly for the purpose of our decision here, we take the facts as follows:

Plaintiff, by a letter addressed to defendant company dated October 17, 1941, offered to make efforts to procure for defendant contracts for manufacturing products for national defense or war purposes, in consideration of defendant's agreement to pay him $1,000 per month for a three months' period if he were unsuccessful in his efforts, but, if he were successful, to pay him a further sum in an amount not to be less than 3% nor more than 8% of the "purchase price of said contracts." On October 31, 1941, at a meeting in Grand Rapids, Michigan, between plaintiff and defendant's President, the latter, on behalf of his company, orally made an agreement with plaintiff substantially on the terms set forth in plaintiff's letter, one of the terms being that mentioned in plaintiff's letter as to commissions; it was orally agreed that the exact amount within the two percentages was to be later determined by the parties. After this agreement was made, the parties executed, in Grand Rapids, a written instrument dated October 31, 1941, appearing on its face to embody a complete agreement between them; but that writing omitted the provision of their agreement that plaintiff, if successful, was to receive a bonus varying from three to eight per cent; instead, there was inserted in the writing a clause that the $1,000 per month "will be full compensation, but the company may, if it desires, pay you something in the nature of a bonus." However, at the time when they executed this writing, the parties orally agreed that the previous oral agreement was still their actual contract, that the writing was deliberately erroneous with respect to plaintiff's commissions, and that the misstatement in that writing was made solely in order to "avoid any possible stigma which might result" from putting such a provision "in writing," the defendant's President stating that "his fears were based upon the criticism of contingent fee contracts." Nothing in the record discloses whose criticism the defendant feared; but plaintiff, in his brief, says that defendant was apprehensive because adverse comments had been made in Congress of such contingent-fee arrangements in connection with war contracts. The parties subsequently executed further writings extending, for two three-month periods, their "agreement under date of October 31, 1941." Through plaintiff's efforts and expenditures of large sums for traveling expenses, defendant, within this extended period, procured contracts between it and companies supplying aircraft to the government for war purposes, the aggregate purchase price named in said contracts being $5,950,000. The defendant has refused to pay the plaintiff commissions thereon in the agreed amount (i.e., not less than three percent) but has paid him merely $8,950 (at the rate of $1,000 a month) and has offered him, by way of settlement, an additional sum of $9,000 which he has refused to accept as full payment.

Defendant argues that the summary judgment was proper on the ground that, under the parol evidence rule, the court could not properly consider as relevant anything except the writing of October 31, 1941, which appears on its face to set forth a complete and unambiguous agreement between the parties. If defendant on this point is in error, then, if the plaintiff at a trial proves the facts as alleged by him, and no other [643] defenses are successfully interposed, he will be entitled to a sum equal to 3% of $5,950,000.

Were the parol evidence rule a rule of evidence, we could decide this question without reference to state court decisions.^[1] But the federal courts have held, in line with what has become the customary doctrine in most states, that it is a rule of substantive law, i.e., the extrinsic proof is excluded because no claim or defense can be founded upon it.^[2] The acid test of whether the rule is substantive or procedural would seem to be whether, if extrinsic evidence is received without objection, it can be regarded as material and made the basis of the court's decision;^[3] if it can, then, presumably the rule is like the hearsay rule. But in Higgs v. De Maziroff, 263 N.Y. 473, 189 N.E. 555, 92 A.L.R. 807, the court said that if extrinsic evidence is thus received and if the attention of the trial court is not otherwise called to the parol evidence rule, that evidence becomes relevant and that no complaint because of the reception of that evidence can be raised on appeal.^[4] It might therefore be argued that, in New York, the parol evidence rule is procedural, with the consequence that, although the contract was made in Michigan, the New York parol evidence decisions would govern.^[5] But the court, in Higgs v. De Maziroff, explicitly stated that the rule creates a substantive defense and, in effect, held that, like many other substantive defenses, it is "waived" if not properly raised in the trial court; in other words, "waivability" is not a unique quality of procedural errors. The substantive character of the rule, although perhaps shadowy, still exists in New York. It seems clear then that, for purposes of conflict of laws, New York would consider that rule as not procedural. Consequently, we must here apply the law of Michigan.^[6]

It is not surprising that confusion results from a rule called "the parol evidence rule" which is not a rule of evidence, which relates to extrinsic proof whether written or parol^[7] and which has been said to be virtually no rule at all.^[8] As Thayer said of it, "Few things are darker than this, or fuller of subtle difficulties."^[9] The rule is often loosely and confusingly stated as if, once the evidence establishes that the parties executed a writing containing what appears to be a complete and unambiguous agreement, then no evidence may be received of previous or contemporaneous oral understandings which contradict or vary its terms. But, under the parol evidence rule correctly stated, such a writing does not acquire that dominating position if it has been proved by extrinsic evidence that the parties did not intend it to be an exclusive authoritative memorial of their agreement. If they did intend it to occupy that position, their secret mutual intentions as to the [644] terms of the contract or its meaning are usually irrelevant, so that parties who exchange promises may be bound, at least "at law" as distinguished from "equity," in a way which neither intended, since their so-called "objective" intent governs. When, however, they have previously agreed that their written promises are not to bind them, that agreement controls and no legal obligations flow from the writing.^[10] It has been held virtually everywhere, when the question has arisen that (certainly in the absence of any fraudulent or illegal purpose) a purported written agreement, which the parties designed as a mere sham, lacks legal efficacy, and that extrinsic parol or other extrinsic evidence will always be received on that issue. So the highest court of Michigan has several times held.^[11] It has gone further: In Woodard v. Walker, 192 Mich. 188, 158 N.W. 846, that court specifically enforced against the seller an oral agreement for the sale of land which had been followed by a sham written agreement, for sale of the same land at a higher price, intended to deceive the seller's children who were jealous of the buyer.^[12]

We need not here consider cases where third persons have relied on the delusive agreement to their detriment^[13] or cases in other jurisdictions (we find none in Michigan) where the mutual purpose of the deception was fraudulent or illegal.^[14] For the instant case involves no such elements. As noted above, the pleadings and affidavits are silent as to the matter of whom the parties here intended to mislead, and we cannot infer a fraudulent or illegal purpose. Even the explanation contained in plaintiff's brief discloses no fraud or illegality: No law existed rendering illegal the commission provision of the oral agreement which the parties here omitted from the sham writing; while it may be undesirable that citizens should prepare documents so contrived as to spoil the scent of legislators bent on proposing new legislation, yet such conduct is surely not unlawful and does not deserve judicial castigation as immoral or fraudulent; the courts should not erect standards of morality so far above the customary. Woodard v. Walker leaves no doubt that the Michigan courts would hold the parol evidence rule inapplicable to the facts as we have interpreted them.

Candor compels the admission that, were we enthusiastic devotees of that rule, we might so construe the record as to bring this case within the rule's scope; we could dwell on the fact that plaintiff, in his complaint, states that the acceptance of his offer "was partly oral and partly contained" in the October 31 writing, and could then hold that, as that writing unambiguously covers the item of commissions, the plaintiff is trying to use extrinsic evidence to "contradict" the writing. But the plaintiff's affidavit, if accepted as true and liberally construed, makes it plain that the parties deliberately intended the October 31 writing to be a misleading, untrue, statement of their real agreement.^[15]

We thus construe the record because we do not share defendant's belief that the rule is so beneficent, so promotive of the administration of justice, and so necessary to business stability, that it should be given the widest possible application. The truth is that the rule does but little to achieve the ends it supposedly serves. Although seldom mentioned in modern decisions, the most important motive for perpetuation [645] of the rule is distrust of juries, fear that they cannot adequately cope with, or will be unfairly prejudiced by, conflicting "parol" testimony.^[16] If the rule were frankly recognized as primarily a device to control juries, its shortcomings would become obvious,^[17] since it is not true that the execution by the parties of an unambiguous writing, "facially complete," bars extrinsic proof. The courts admit such "parol" testimony (other than the parties' statements of what they meant by the writing) for a variety of purposes: to show "all the operative usages" and "all the surrounding circumstances prior to and contemporaneous with the making" of a writing;^[18] to show an agreed oral condition, nowhere referred to in the writing, that the writing was not to be binding until some third person approved; to show that a deed, absolute on its face, is but a mortgage. These and numerous other exceptions have removed most of that insulation of the jury from "oral" testimony which the rule is said to provide.

The rule, then, does relatively little to deserve its much advertised virtue of reducing the dangers of successful fraudulent recoveries and defenses brought about through perjury. The rule is too small a hook to catch such a leviathan. Moreover, if at times it does prevent a person from winning, by lying witnesses, a lawsuit which he should lose, it also, at times, by shutting out the true facts, unjustly aids other persons to win lawsuits they should and would lose, were the suppressed evidence known to the courts. Exclusionary rules, which frequently result in injustice, have always been defended — as was the rule, now fortunately extinct, excluding testimony of the parties to an action — with the danger-of-perjury argument.^[19] Perjury, of course, is pernicious and doubtless [646] much of it is used in our courts daily with unfortunate success. The problem of avoiding its efficacious use should be met head on. Were it consistently met in an indirect manner — in accordance with the viewpoint of the adulators of the parol evidence rule — by wiping out substantive rights provable only through oral testimony, we would have wholesale destruction of familiar causes of action such as, for instance, suits for personal injury and for enforcement of wholly oral agreements.

The parol evidence rule is lauded as an important aid in the judicial quest for "objectivity," a quest which aims to avoid that problem the solution of which was judicially said in the latter part of the fifteenth century to be beyond even the powers of Satan — the discovery of the inner thoughts of man. The policy of stern refusal to consider subjective intention, prevalent in the centralized common law courts of that period, later gave way; in the latter part of the 18th and the early part of the 19th century, the recession from that policy went far, and there was much talk of the "meeting of the minds" in the formation of contracts, of giving effect to the actual "will" of the contracting parties. The obstacles to learning that actual intention have, more recently, induced a partial reversion to the older view.^[20] Today a court generally restricts its attention to the outward behavior of the parties: the meaning of their acts is not what either party or both parties intended but the meaning which a "reasonable man" puts on those acts; the expression of mutual assent, not the assent itself, is usually the essential element.^[21] We now speak of "externality," insisting on judicial consideration of only those manifestations of intention which are public ("open to the scrutiny and knowledge of the community") and not private ("secreted in the heart" of a person).^[22] This objective approach is of [647] great value, for a legal system can be more effectively administered if legal rights and obligations ordinarily attach only to overt conduct. Moreover, to call the standard "objective" and candidly to confess that the actual intention is not the guiding factor serves desirably to high-light the fact that much of the "law of contracts" has nothing whatever to do with what the parties contemplated but consists of rules — founded on considerations of public policy — by which the courts impose on the contracting parties obligations of which the parties were often unaware; this "objective" perspective discloses that the voluntary act of entering into a contract creates a jural "relation" or "status" much in the same way as does being married or holding a public office.^[23]

But we should not demand too much of this concept of "objectivity"; like all useful concepts it becomes a thought-muddler if its limitations are disregarded. We can largely rid ourselves of concern with the subjective reactions of the parties;^[24] when, however, we test their public behavior by inquiring how it appears to the "reasonable man," we must recognize, unless we wish to fool ourselves, that although one area of subjectivity has been conquered, another remains unsubdued. For instance, under the parol evidence rule, the standard of interpretation of a written contract is usually "the meaning that would be attached to" it "by a reasonably intelligent person” acquainted with all operative usages and knowing all the circumstances prior to, and contemporaneous with, the making" of the contract, "other than oral statements by the parties of what they intended it to mean.”^[25] We say that "the objective viewpoint of a third person is used.”^[26] But where do we find that "objective" third person? We ask judges or juries to discover that "objective viewpoint" — through their own subjective processes. Being but human, their beliefs cannot be objectified, in the sense of being standardized. Doubtless, there is some moderate approximation to objectivity, that is, to uniformity of beliefs, among judges — men with substantially similar training — although less than is sometimes supposed.^[27] But no one can seriously maintain that such uniformity exists among the multitude of jurymen, men with the greatest conceivable variety of training and background. When juries try cases, objectivity is largely a mirage; most of the objectivity inheres in the words of the "reasonable man" standard which the judges, often futilely, admonish juries to apply to the evidence. Certain aspects of subjectivity common to all men seem to have been successfully eliminated in the field of science through the "relativity theory" — which might better be called the "anti-relativity" or "absolute" theory.^[28] But equal success has not attended the anti-relativity [648] or objective theory in the legal field.^[29] Perhaps nine-tenths of legal uncertainty is caused by uncertainty as to what courts will find, on conflicting evidence, to be the facts of cases.^[30] Early in the history of our legal institutions, litigants strongly objected to a determination of the facts by mere fallible human beings. A man, they felt, ought to be allowed to demonstrate the facts "by supernatural means, by some such process as the ordeal or the judicial combat; God may be for him, though his neighbors be against him."^[31] We have accepted the "rational" method of trial based on evidence but the longing persists for some means of counter-acting the fallibility of the triers of the facts. Mechanical devices, like the parol evidence rule, are symptoms of that longing,^[32] a longing particularly strong when juries participate in trials.^[33] But a mechanical device like the parol evidence rule cannot satisfy that longing, especially because the injustice of applying the rule rigidly has led to its being riddled with exceptions.

Those exceptions have, too, played havoc with the contention that business stability depends upon that rule, that, as one court put it "the tremendous but closely adjusted machinery of modern business cannot function at all without" the assurance afforded by the rule and that, "if such assurance [649] were removed today from our law, general disaster would result. .  . .”^[34] We are asked to believe that the rule enables businessmen, advised by their lawyers, to rely with indispensable confidence on written contracts unimpeachable by oral testimony. In fact, seldom can a conscientious lawyer advise his client, about to sign an agreement, that, should the client become involved in litigation relating to that agreement, one of the many exceptions to the rule will not permit the introduction of uncertainty-producing oral testimony. As Corbin says, "That rule has so many exceptions that only with difficulty can it be correctly stated in the form of a rule."^[35] One need but thumb the pages of Wigmore, Williston, or the Restatement of Contracts to see how illusory is the certainty that the rule supplies. "Collateral parol agreements contradicting a writing are inadmissible," runs the rule as ordinarily stated; but in the application of that standard there exists, as Williston notes, "no final test which can be applied with unvarying regularity."^[36] Wigmore more bluntly says that only vague generalizations are possible, since the application of the rule,

"resting as it does on the parties' intent, can properly be made only after a comparison of the kind of transaction, the terms of the document, and the circumstances of the parties. . . . Such is the complexity of circumstances and the variety of documentary phraseology, and so minute the indicia of intent, that one ruling can seldom be controlling authority or even of utility for a subsequent one."^[37]

The recognized exceptions to the rule demonstrate strikingly that business can endure even when oral testimony competes with written instruments. If business stability has not been ruined by the deed-mortgage exception, or because juries may hear witnesses narrate oral understandings that written contracts were not to be operative except on the performance of extrinsic conditions, it is unlikely that commercial disaster would follow even if legislatures abolished the rule in its entirety.^[38]

In sum, a rule so leaky cannot fairly be described as a stout container of legal certainty. John Chipman Gray, a seasoned practical lawyer, expressed grave doubts concerning the reliance of businessmen on legal precedents generally.^[39] If they rely on the parol evidence rule in particular, they will often be duped. It has been seriously questioned whether in fact they do so to any considerable extent.^[40] We see no [138 F.2d  650] good reason why we should strain to interpret the record facts here to bring them within such a rule.^[41]

Reversed and remanded.

[1] As we did in the carefree days before the advent of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487; see e. g., In re Hicks & Sons, 2 Cir., 82 F.2d 277.

[2] Pitcairn v. Philip Hiss Co., 3 Cir., 125 F. 110, 113; American Sugar Co. v. Nicholas, 10 Cir., 124 F.2d 477, 479.

[3] Wigmore, citing a case where such evidence, although admitted without objection, was held irrelevant, calls it "a neat illustration of the practical difference between a rule of evidence and this rule of substantive law . . ." 9 Wigmore, Evidence, 3d Ed., p. 78, § 2425. [4] The weight of authority is contra; see 92 A.L.R. 810.

[4] The weight of authority is contra; see 92 A.L.R. 810.

[5] It has been suggested that, where the federal courts, regarding a rule as substantive, refer to state decisions which in turn regard the rule as procedural, Erie R. Co. v. Tompkins does not control. But this merry-go-round suggestion neglects the fact that the Tompkins mandate requires us, as to matters which federally are substantive, to regard ourselves as a state court.

[6] Cf. United States Mortgage & Trust Co. v. Ruggles, 258 N.Y. 32, 38, 179 N.E. 250, 79 A.L.R. 802.The pleadings and affidavits before the trial court were silent concerning the law of Michigan. If a New York court had passed on the motion, it would probably, absent such a showing, have presumed the Michigan rule to be the same as that in New York. But the federal courts take judicial notice of the decisions of the several states; the doctrine of judicial notice being a rule of evidence, we must, under Federal Rules of Civil Procedure, rule 43 (a), 28 U.S.C.A. following section 723c, apply it here and take notice of the Michigan decisions.

[7] Restatement of Contracts, § 237, comment a. Indeed the agreement, protected by the rule from competition with extrinsic proof, may itself be wholly oral. See Wigmore, Evidence, 3d Ed., § 2425.

[8] Cf. Corbin, Delivery of Written Contracts, 36 Yale L.J. (1927) 443.

[9] Thayer, A Preliminary Treatise on Evidence (1898) 390.

[10] See cases collected in L.R.A.,1917B, 263; cf. Williston, Contracts, Rev.Ed., § 21.

[11] Woodard v. Walker, 192 Mich. 188, 158 N.W. 846; Church v. Case, 110 Mich. 621, 68 N.W. 424; Keller v. Holderman, 11 Mich. 248, 83 Am.Dec. 737.

[12] Cf. Beaman-Marvell Co. v. Gunn, 306 Mass. 419, 28 N.E.2d 443, where the court in a suit at law enforced the earlier oral agreement.

[13] See cases collected in 64 A.L.R. 601.

[14] See, e. g., Graham v. Savage, 110 Minn. 510, 126 N.W. 394, 136 Am.St.Rep. 527, 19 Ann.Cas. 1022; Town of Grand Isle v. McKinney, 70 Vt. 381, 41 A. 130; Alexander v. Royson 1936 1 K.B. 169, 114 A.L.R. 358; in these cases the courts refused to recognize the oral agreement and enforced the sham written agreement. Contra: In re Hicks & Son, 2 Cir., 82 F. 2d 277; New York Trust Co. v. Island Oil & Transport Corp., 2 Cir., 34 F.2d 655; in those cases the party suing on the sham agreement was denied relief, but the courts, in Nightingale v. J. H. & C. K. Eagle, 141 App.Div. 386, 126 N.Y.S. 339, and in Beaman-Marvell Co. v. Gunn, supra, went further and enforced the earlier oral agreement in suits at law. Cf. L.R.A. 1917B, 263, 264, 265.

[15] Cf. Seaboard Terminals Corp. v. Standard Oil Co., 2 Cir., 104 F.2d 659, 660, where we said that "if facts appear in affidavits which would justify an amended complaint, there may be ground for treating the complaint as though it were already amended to conform.

[16] That this fear was one of the causes of the creation of the rule, see Thayer, A Preliminary Treatise on Evidence (1898) 409, 410; Wigmore, Evidence, 3d Ed., § 2446.

Formalism was also a causal factor. See 9 Wigmore, ibid. However, for criticism of over-emphasis on the formalism of the so-called "strict period of law," see United States v. Forness, 2 Cir., 125 F.2d 928, 935, 936.

Another factor was veneration for the written word. See Wigmore, ibid. Paul Radin, Primitive Man as Philosopher (1927) 59-60, says: "Much if not all of the magical quality and potency possessed by the word is derived from its connection with the written script. That is quite intelligible. Granted a dynamic and ever-changing world, then the written word with its semi-permanence and its static character was a much desired oasis . . . But culturally and psychologically it possessed even a greater significance, for it completed the victory of the visual-minded man over his competitors. From that time on, at least for the literate man, the main verities were the visual verities."

The perpetuation of the parol evidence rule doubtless owes much to inertia. Cf. Hoffman v. Palmer, 2 Cir., 129 F.2d 976, 997, 998. Any profession, the medical as well as the legal, possessed of a monopoly in its field, tends to develop what are today called "bureaucratic" habits of strong disinclination to alter its established ways. Cf. Seagle, The Quest for Law (1941) xv, 86, 96, 100, 101, 136; Stern, Social Factors in Medical Progress (1927). Unconscious sadism perhaps, too, influences some of the academic praise of the parol evidence rule: some cloistered scholars seem to take satisfaction in "hard cases" which, they feel, should not lead to deviations from "good law.”

[17] See McCormick, The Parole Evidence Rule as a Procedural Device for Control of the Jury, 41 Yale L.J. (1932) 364. McCormick points out that there is little discussion of the important procedural problem of division of functions between judge and jury in the administration of the rule. Had the rule been regarded as one of evidence, it would, for instance, have been dealt with in the A. L. I. Code of Evidence, and the procedural workings of the rule would there have received full consideration. Instead, the subject of that rule was made a part of the Restatement of Contracts, which gives that problem only a side-glance.

It is one of the anomalies of Erie R. Co. v. Tompkins that the federal courts, where the trial judge has an important role in a trial, must adopt state court rulings concerning parol evidence although those rulings are often a product of fear of the jury engendered by the relative impotence of the state trial judge in jury cases.

[18] Restatement of Contracts, § 230.

[19] "Perjury is one of the great bugaboos of the law. Every change in procedure by which the disclosure of the truth has been made easier has raised the spectre of perjury to frighten the profession. It was only in 1851 that Lord Brougham's Act for the first time made the parties to civil actions competent to testify in the higher courts of England. There was great dread of the Act, lest the interest of the parties should prove too powerful an incentive to false swearing . . .  But the fear that the temptation to perjury would ruin the value of the testimony of interested parties has so completely vanished that no one would seriously think of restoring the disqualification." Sunderland, Scope and Method of Discovery Before Trial, 42 Yale L. J. (1933) 863, 867.

[20] Williston, Freedom of Contract, 6 Cornell L. Q. (1921) 365; Williston, Contracts, Rev. Ed., §§ 20, 21; Holland, Jurisprudence, 4th Ed. 1887, 210-217; cf. Oliphant, Review of Williston on Contracts, 19 Mich.L.Rev. (1921) 358.That, in the 20th century, continental legal thinking turned from excessive emphasis on "autonomy of the will" and "the phychological idea of agreement" to "objectivity," see Geny, Judicial Freedom of Decision in The Science of Legal Method (transl. 1921) 2, 25-28, and the astute observations of Wurzel, Methods of Juridical Thinking, in the same volume, 286, 395-400.

[21] Not always. The mutual intent of the parties, not "objectively" manifested, is considered for instance, in an action in equity for reformation of a written contract because of mutual mistake. As Wigmore puts it, "The theory of reformation is to make the instrument state, objectively and in appearance to others, what it did subjectively state to the parties themselves"; the reformation is needed only to make it "appear to the rest of the world as it appeared (and therefore legally was) to the parties when they signed it." Wigmore, loc. cit., §§ 2417, 2418.

Williston insists that equity, in the reformation cases, does not abandon the "objective test," that, no matter what the equity courts say, they do not really hold that the parties made a contract according to their "subjective" intent but merely that the parties must be dealt with "as if" they had. He relies on the fact that equity will not grant such relief unless it is "equitable" to do so. See, Williston, Mutual Assent in The Formation of Contracts, 14 Ill.L.Rev. (1919) 85. But such a distinction seems excessively to depend on a procedural difference (on the side of the court in which the action is brought), a distinction peculiarly tenuous today under the new Rules of Civil Procedure. Moreover, in actions "at law," equitable factors are considered, as in the case of "equitable defenses." Since equity does frequently regard what the parties mutually intended, despite the fact that that intention is not "objective," it cannot be said that "objectivity" is the exclusive test in the "law of contracts" under our judicial system today.

As Oliphant notes, "It may be that the old subjective theory is yet a half truth . . . We may find that one cannot assert rights and powers unless he was actually, as well as reasonably, led to expect the performance for which he sues, that upon such expectation he subjectively relied at the time the alleged bargain was made." Oliphant, Review of Williston on Contracts, 19 Mich.L.R. (1921) 358. See the cases discussed by Wigmore, loc. cit., § 2416, note 2.

[22] City of Indianapolis v. Kingsbury, 101 Ind. 200, 201, 213, 51 Am.Rep.

The effort to eliminate subjectivity by distinguishing between "knowledge," which is "public," as distinguished from mere "opinion," which is "private," goes back at least to Plato; see A. E. Taylor, Plato (2d ed. 1927) 79-80, 326-334, discussing Plato's Cratylus and Thaeatetus. Hogben (not noting his debt to Plato) utilizes that verbal device; he asserts that only exact science is "public" (because it alone renders possible the communication from man to man of reactions to experience, with no possibility of misunderstanding), and that therefore science has an exclusive monopoly of "knowledge"; Hogben, The Nature of Living Matter (1931), Chapters III, X, XI, XII. For criticism of this smug scientific attitude, see Wallas, The Idol of The Laboratory, in Calverton, The Making of Society (1937) 764, 767-774. Cf. Cooley, Art, Science and Sociology, in Calverton, loc. cit., 725; cf. Schroedinger, Science and The Human Temperament (1935) Chapters 4 and 5; Langer, Philosophy in a New Key (1942).

[23] See Beidler & Bookmyer, Inc., v. Universal Insurance Co., 2 Cir., 134 F.2d 828; Kulukundis Shipping Co. v. Amtorg Trading Corp., 2 Cir., 126 F.2d 978, 991 and note 43; United States v. Forness, 2 Cir., 125 F.2d 928, note 26; 3 Williston, Contracts (Rev. Ed. 1938) §§ 615, 825, 896; Williston, Freedom of Contract, supra; Corbin, Conditions in the Law of Contracts, 28 Yale L. J. (1919) 739.

[24] Not entirely; see note 20a, supra.

[25] Restatement of Contracts, § 230 (Italics added).

[26] Restatement of Contracts, § 230, comment.

[27] Mr. Justice Miller said, "In my experience in the conference room of the Supreme Court of the United States, which consists of nine judges, I have been surprised to find how readily those judges come to an agreement upon questions of law, and how often they disagree in regard to questions of fact which apparently are as clear as the law"; quoted in 2 Moore, Facts, § 727. See United States v. Shipp, 214 U.S. 386, 29 S.Ct. 637, 53 L. Ed. 1041; there the Supreme Court passed directly on testimony, taken by a Master appointed by the court, with respect to a simple issue of fact; the Justices sharply divided, the majority and minority respectively reaching diametrically opposed findings of fact because of their differences as to the credibility of the witnesses.

[28] See Einstein and Infeld, The Evolution of Physics (1938) 224; Russell, in Introduction to Lange, History of Materialism, 1925 Ed., xviii; Benjamin, An Introduction to the Philosophy of Science (1937) 304-308.

[29] It is of interest that Plato suggested that courts, in passing on evidence, could not arrive at "knowledge," but merely at "opinion." Plato, Thaeatetus, 201; cf. 172, 173, 175.

That the "reasonable man" test stems from "natural law" concepts, see Beidler & Bookmyer, Inc., v. Universal Insurance Co., 2 Cir., 134 F.2d 828, 830 note 7; authorities there cited show the difficulties of attaining more than very general principles of "natural law," varying in their application with time, place, and circumstances.

[30] A court's decision turns on the "facts" of the case. But the "facts," when there is a clash of testimony, are nothing but a subjective reaction of the judge or jury to the behavior of the witnesses. Not the actual past conduct of the parties to the lawsuit but the judge's or jury's conjecture as to that conduct, after hearing the testimony, constitute the "facts." Lord Bramwell once remarked, "One-third of a judge is a common-law juror if you get beneath the ermine"; and Mr. Justice Riddell added, "The other two-thirds may not be far different."

[31] Maitland, The Constitutional History of England (1908) 130.

[32] Thayer delightfully described the fatuous notion of a "lawyer's Paradise, where all words have a fixed, precisely ascertained meaning; where men may express their purposes, not only with accuracy, but with fullness; and where, if the writer has been careful, a lawyer, having a document referred to him, may sit in his chair, inspect the text, and answer all questions without raising his eyes." Thayer, loc. cit., 428, 429.

[33] It is true that, by restricting what the jury can learn concerning the words used by the parties to a writing, the parol evidence rule reduces the range of differences of opinion among the jurymen as to the parties' "objective" intention. Undeniably, however, that rule, when operative, often artificializes the problem; it creates a picture which, because of its inaccuracy, may have sharper outlines than the actual facts. The task of triers of the facts is indeed difficult — that of inferring, from present evidence, events which happened in the past and which cannot be made to occur before their eyes. The greater the conflict in the evidence, the more the subjective uncertainty of the jurymen about those past happenings. So that a false appearance of certainty in knowledge about the past conduct of the parties can to some extent be attained through the ignorance compelled by the parol evidence rule.

Vis a vis the parol evidence rule, however, the major cause of distrust of the jury is not so much the fear that they will not comprehend the complicated facts or be unable to detect perjury, but rather that they will base their verdict not on the evidence but on their sympathies and that their verdict cannot be upset should the perjured testimony support the verdict, regarding that testimony as true (as it must be regarded after a general verdict).

Much of the difficulty derives from the use of the general verdict which makes it all but impossible to control the jury especially when there is conflicting evidence. This difficulty can, in considerable measure, be obviated by a request for a special verdict. See Sunderland, Verdicts General and Special, 29 Yale L. J. 253 (1919); McCormick, Jury Verdicts on Special Questions in Civil Cases, 2 F.R.D. 176; Nordbye, Use of Special Verdicts Under Rules of Civil Procedure, 2 F.R.D. 139; Rossman, The Judge-Jury Relationship in The State Courts, 3 F.R.D. 98; cf. Foster v. Moore-McCormack Lines, 2 Cir., 131 F.2d 907, 908.

[34] Cargill Commission Co. v. Swartwood, 159 Minn. 1, 198 N.W. 536, 538

[35] Corbin, Delivery of Written Contracts, 36 Yale L. J. (1927) 443.

[36] 3 Williston, Contracts, Rev. Ed., § 1837.

Proof of "collateral" agreements seems generally to be more freely permitted when the writing is a negotiable instrument, a lease or a deed — precisely the types of instrument on which one would suppose that business stability would peculiarly depend.

[37] Wigmore, loc. cit., § 2442.

[38] No one can suggest why the dangers of perjured testimony should be courted in such cases relating to writings and shunned in others.

[39] See Gray, The Nature and Sources of Law (1921) § 225; cf. Austin, Jurisprudence, 4th Ed., 674; concurring opinion in Aero Spark Plug Co. v. B. G. Corp., 2 Cir., 130 F.2d 290, 292, 297, 298; Wigmore, The Judicial Function, in the Science of Legal Method (1917) Editorial Introduction, xxxvi-xxxix.

[40] "The court assumes as self-evident that without some special assurance of the enforcement of contracts as written, as against claims of inconsistent oral agreements, businessmen generally will be seriously handicapped in the prosecution of commercial enterprise. Like most of the law's basic assumptions, this one has never been tested by any survey of the actual effects in business of the presence or absence of such assurance . . . It would, perhaps, be worthwhile to canvass the managers and counsel of business enterprises of country-wide scope, to ascertain whether they are aware of the lack of strictness of the courts of a few of the states (e. g., North Carolina) in protecting writings against claimed oral agreements, and, if so, whether this influences the amount and methods of business done by them in those states . . . The telephone, and the urgent call for high speed in certain types of important transactions, such as security trading, have accustomed businessmen to rely upon word-of-mouth, and to dispense with the safeguard of writing. This is suggested in a letter from Professor Nathan Isaacs, from which I take the liberty of quoting: `In the first place, the businessman of today relies and must rely less and less on writing than he did even fifty years ago. The telephone has something to do with this change, but a more important factor is the speed required in modern business. It is true that our facilities for rapid writing have increased, but our need for rapidity in transactions has increased much more rapidly. The result is that the businessman, is accustomed to seeing millions of dollars worth of securities change hands on the stock exchange without the scratch of a pen. But this is not the whole or even the most important part of the story. Even where writing is resorted to, two forces have conspired to prevent the writing from containing or even purporting to contain the "whole" contract. One of these is the growing complexity of transactions, and the other is a phase of the speed already mentioned which shows itself in the brevity of business letters and other memoranda. To fill the gaps which necessarily result in the modern business contract, we resort more and more to the standardizing elements (customs, statutes, rules of trade associations, chambers of commerce, exchanges), but a great many blanks still remain to be filled in by oral understanding. The real danger therefore to the businessman that comes from a strict enforcement of the parol evidence rule, is that as contracts are made today essential parts are in danger of being excluded. In other words, I mean to suggest that however fitting the parol evidence rule may have been when it grew up, it is not in strict accord with the needs of business today. It is a gratuitous assumption that, where people take the trouble to reduce their contract to writing, their motive is to prevent explanations — even contradictory explanations — from entering into the situation. On the contrary, the motive for writing may be the very simple motive of satisfying the need of quick communication or of making a memorandum in such a form as to fit into the plan of a business for having the memorandum acted on, or it may be some quite different motive.'" McCormick, 41 Yale L. J. 364, 365, 366, 384.

[41] Rather than judicially to extend the scope of the rule, it might be well by legislation to restrict it. If the basic motive in perpetuating it is fear of juries, the legislatures might deal with it somewhat as the proposed A. L. I. Code of Evidence deals with certain phrases of the hearsay rule: When a judge tries a case without a jury, make the parol evidence rule inapplicable or reduce it to the level of a rebuttable presumption; when a jury sits, leave it to the trial judge to apply the rule to the extent that, in his discretion, he thinks that the extrinsic evidence now excluded by the rule will prejudicially affect the jury.

For discussion of suggested modifications of the rule, see McCormick, 41 Yale L. J. 364.

322 U.S. 709
64 S.Ct. 1053
88 L. Ed. 1552

AMERICAN SEATING COMPANY, petitioner,
v.
LUCIAN T. ZELL.

No. 613.
Supreme Court of the United States.
May 8, 1944.

Messrs. Wm. Dwight Whitney and Albert R. Connelly, both of New York City (Mr. John Logan O'Donnell, of Washington, D. C., of counsel), for petitioner.

Messrs. J. Edward Lumbard, Jr. and Theodore S. Hope, Jr., both of New York City (Messrs. Donovan, Leisure, Newton & Lumbard, and Ralstone R. Irvine, all of New York City, and Charles W. Sellers, of Cleveland, Ohio, of counsel), for respondent.

On writ of certiorari to the Circuit Court of Appeals for the Second Circuit.

PER CURIAM.

In this case two members of the Court think that the judgment of the Circuit Court of Appeals should be affirmed. Seven are of opinion that the judgment should be reversed and the judgment of the District Court affirmed—four because proof of the contract alleged in respondent's affidavits on the motion for summary judgment is precluded by the applicable state parol evidence rule, and three because the contract is contrary to public policy and void, see Tool Company v. Norris, 2 Wall. 45, 54, 17 L.Ed. 868; Hazelton v. Sheckells, 202 U.S. 71, 79, 26 S.Ct. 567, 568, 50 L.Ed. 939, 6 Ann.Cas. 217; Executive Order No. 9001, Tit. II, par. 5, 6 Fed.Reg. 6788, 50 U.S.C.A. Appendix § 611 note; War Department Procurement Regulations, 10 Code Fed.Reg. (Cum. Supp.) sec. 81.1181. The judgment of the Circuit Court of Appeals is reversed.