Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 8

Watkins v.Schexnider
Court of Appeal of Louisiana, Third Circuit, 31 So.3d 609(2010).
FACTS In 2000, Pamela Watkins purchased a home from Sandra Schexnider. The home purchase agreement stated that Watkins would pay off the balance of the mortgage in monthly payments until the note was paid in full. "Then the house will be hers." The agreement also stipulated that Watkins would pay for insurance on the property. Watkins regularly paid the note and insurance. The home was destroyed following Hurricane Rita in 2005, and the mortgage was satisfied by the insurance proceeds. Watkins claimed that she owned the land, but Schexnider refused to transfer title to her. Schexnider asserted that she had sold only the house to Watkins, not the land. Watkins filed a petition in a Louisiana state court for specific performance of the agreement. The trial court denied her claim for specific performance, concluding that the "clear wording of the contract" indicated that Watkins was purchasing only the house, not the property. Because the contract was clear on its face, the court refused to admit parol evidence to the contrary. Watkins appealed.
ISSUE Were the terms of the contract unclear as to whether Watkins would receive title to the house only or to the house and the land on which it sits?
DECISION Yes. The Court of Appeal of Louisiana held that parol evidence should have been admitted to clarify the meaning of the contract. In light of the parol evidence, the court concluded that (1) the parties intended to transfer ownership of both the house and the land, and (2) it ordered that title to the property be transferred to Watkins.
REASON The court reasoned that parol evidence is allowed "in many instances in order to discern the intention of the parties in contracts to sell real estate." Here, an ambiguity arose because Schexnider claimed that the contract conveyed only the house and yet failed to put any such provision in writing. Rarely does a party intend to sell a house and not the land on which it sits. Therefore, a person who intends to sell only the house normally will indicate this intention in the contract. Further, Schexnider, when showing the house, had taken Watkins around the property and had pointed out the property lines. A witness, Marla Raffield (Watkins's daughter-in-law), testified that she had been present when the property boundaries were shown. The court concluded that "the land was included as part of the sale."
FOR CRITICAL ANALYSIS-Ethical Consideration The parol evidence rule is centuries old and is an important rule of contract law. Why should the courts allow exceptions to this rule?