68 Cal. 2d 222, 436 P.2d 561 (1968)
Dallas Masterson and his wife Rebecca owned a ranch as tenants in common.1 On February 25, 1958, they conveyed it to Medora and Lu Sine by a grant deed.2 The deed reserved unto the grantors an option to purchase the property on or before February 25, 1968 for the same consideration as being paid heretofore plus the depreciation value of any improvements the grantees might add after two and a half years from the date.3 Medora is Dallas's sister and Lu's wife.4
Since the conveyance Dallas has been adjudged bankrupt.5 His trustee in bankruptcy and Rebecca brought this declaratory relief action to establish their right to enforce the option.6 The case was tried without a jury.7
Over defendants' objection the trial court admitted extrinsic evidence that by the same consideration as being paid heretofore both the grantors and the grantees meant the sum of $50,000 and by depreciation value of any improvements they meant the depreciation value of improvements to be computed by deducting from the total amount of any capital expenditures made by defendants grantees the amount of depreciation allowable to them under United States income tax regulations as of the time of the exercise of the option.8 The court also determined that the parol evidence rule precluded admission of extrinsic evidence offered by defendants to show that the parties wanted the property kept in the Masterson family and that the option was therefore personal to the grantors and could not be exercised by the trustee in bankruptcy.9
The court entered judgment for plaintiffs, declaring their right to exercise the option, specifying in some detail how it could be exercised, and reserving jurisdiction to supervise the manner of its exercise and to determine the amount that plaintiffs will be required to pay defendants for their capital expenditures if plaintiffs decide to exercise the option.10 Defendants appeal.11
Whether the option provision in the deed is too uncertain to be enforced?12
When the parties to a written contract have agreed to it as an integration, parol evidence cannot be used to add to or vary its terms, but extrinsic evidence is admissible to explain the meaning of a written instrument when the meaning is not clear.13 The trial court properly refused to frustrate the obviously declared intention of the grantors to reserve an option to repurchase by an overly meticulous insistence on completeness and clarity of written expression.14
No. The option provision is not too uncertain to be enforced.15 The trial court properly admitted extrinsic evidence to explain the language of the deed to the end that the consideration for the option would appear with sufficient certainty to permit specific enforcement. The evidence clarified that the consideration meant $50,000 and that depreciation was to be computed under United States income tax regulations.16
The option provision is enforceable.17
Whether extrinsic evidence as to the meaning of the option's consideration terms should have been admitted?18
Extrinsic evidence is admissible to interpret the instrument when the meaning is not clear, but not to give it a meaning to which it is not reasonably susceptible.19
Yes. The trial court properly admitted extrinsic evidence to explain the language of the deed.20 The meaning of the same consideration as being paid heretofore and depreciation value of any improvements was not clear on the face of the deed.21 The evidence showed the parties meant $50,000 and tax depreciation.22
Extrinsic evidence as to the meaning of the option's consideration terms was properly admitted.23
Whether the trial court erred in excluding extrinsic evidence that the option was personal to the grantors and therefore nonassignable?24
Evidence of oral collateral agreements should be excluded only when the fact finder is likely to be misled.25 The rule must therefore be based on the credibility of the evidence.26 One such standard permits proof of a collateral agreement if it is such an agreement as might naturally be made as a separate agreement by parties situated as were the parties to the written contract.27 The option clause in the deed does not explicitly provide that it contains the complete agreement, and the deed is silent on the question of assignability.28 Moreover, the difficulty of accommodating the formalized structure of a deed to the insertion of collateral agreements makes it less likely that all the terms of such an agreement were included.29
Yes. The trial court erred in excluding the extrinsic evidence that the option was personal to the grantors and therefore nonassignable.30 A collateral agreement such as that alleged might naturally be made as a separate agreement.31 There is nothing in the record to indicate that the parties to this family transaction had any warning of the disadvantages of failing to put the whole agreement in the deed.32
The trial court erred in excluding the extrinsic evidence.33
Related opinions on this issue
Joined by Mccomb, J.
Justice Burke dissented because the majority undermines the parol evidence rule by declaring that parol evidence should have been admitted to show that a written option, absolute and unrestricted in form, was intended to be limited and nonassignable.34 The opinion permits defendants to establish by parol testimony that their grant to their brother of a written option, absolute in terms, was nevertheless agreed to be nonassignable by the grantee, and that therefore the right to exercise it did not pass to the trustee for the benefit of the grantee's creditors.35 The court properly admitted parol evidence to explain the intended meaning of the consideration phrases.36
However, there was nothing ambiguous about the granting language of the option and not the slightest suggestion in the document that the option was to be nonassignable.37 Thus, to permit such words of limitation to be added by parol is to contradict the absolute nature of the grant, and to directly violate the parol evidence rule.38