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Rule Bars Evidence of Oral Promises That Contradict Written Contract in Suits Under Consumer Practices Act

2008-1337.  Williams v. Spitzer Autoworld Canton, L.L.C., Slip Opinion No. 2009-Ohio-3554.
Stark App. No. 2007 CA 00187, 2008-Ohio-2535.  Judgment reversed.
Moyer, C.J., and Lundberg Stratton, O'Connor, O'Donnell, and Cupp, JJ., concur.
Pfeifer, J., concurs in judgment only.
Lanzinger, J., concurs in syllabus paragraph 2 and judgment only.
Opinion: http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2009/2009-Ohio-3554.pdf Adobe PDF Link opens new window.

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(July 28, 2009) The Supreme Court of Ohio held today that a provision of Ohio’s Administrative Code, O.A.C. 109:4-3-16(B)(22), is unconstitutional and invalid to the extent that it allows state courts to consider “parol evidence” of alleged oral promises or representations made by a vendor to a consumer that are contrary to the terms of a written contract signed by the parties.

In a decision authored by Justice Terrence O’Donnell, the Court also held that the parol evidence rule codified  in R.C. 1302.05 applies to lawsuits brought under the Ohio Consumer Sales Practices Act (CSPA), and absent proof of fraud, mistake or other invalidating cause, that rule bars consumers seeking to prove violations of the CSPA from presenting extrinsic evidence that is contrary to the parties’ final written contract.

Under the parol evidence rule, if an agreement between parties has been reduced to a signed, written contract, and that contract includes language stating that all terms and conditions of the agreement are set forth in the contract and no other terms or conditions previously discussed by the parties are binding on the parties, then neither party may later introduce “parol” evidence (evidence of alleged verbal or written commitments outside of the signed contract) to seek additional compensation or concessions from the other party.

In October 2004,  Reynold Williams Jr. purchased a 2004 GMC Yukon from a Canton auto dealer, Spitzer Autoworld.  As part of that transaction, Williams traded in a 2003 Ford Explorer. The sales agreement signed by both parties indicated that Spitzer had credited Williams with a trade-in allowance of $15,500 toward the purchase price of the Yukon. In 2006, Williams filed suit against Spitzer alleging that the dealer had committed multiple violations of the CSPA in the course of the transaction in which he purchased the Yukon. At trial, Williams testified that the Spitzer representative with whom he negotiated the transaction had orally committed to a trade-in allowance of $16,500 for his Explorer, but thereafter reduced the allowance stated in the sales contract to $15,500.

The jury found that Spitzer knowingly violated the CSPA by orally promising Williams $1,000 more than it provided in the written purchase agreement, and it awarded him $2,500 in compensatory damages.  The trial court entered a judgment in favor of Williams, imposed treble damages pursuant to the CSPA, and also ordered Spitzer to pay Williams’ attorney fees.

Spitzer appealed, contending that the parol evidence rule barred introduction of evidence of a prior oral agreement relating to a trade-in allowance that contradicted the written purchase agreement for the Yukon. The 5th District Court of Appeals rejected that argument and affirmed the judgment of the trial court,  holding that the parol evidence rule does not apply to a claim brought pursuant to the CSPA “because the claim is based not on the contract, but on oral or other misrepresentations.”

Spitzer sought and was granted Supreme Court review of the 5th District’s rulings.

In today’s decision, which reversed the judgment of the 5th District, Justice O’Donnell wrote: “(W)e have previously recognized that the parol evidence rule has application to claims beyond those sounding in contract.  In Ed Schory & Sons (1996), we applied the parol evidence rule to a claim alleging the tort of negligent misrepresentation, and we emphasized that ‘the parol evidence rule will not be overcome by merely alleging that a statement or agreement made prior to an unambiguous written contract is different from that which is contained in the contract.’ ... Because the parol evidence rule is substantive in nature and not limited in application to contract claims, we conclude that it also applies to statutory causes of action such as the CSPA.”

“The court of appeals, here, relying on a decision of the Second District Court of Appeals, concluded that the parol evidence rule has no application in the context of an action alleging a violation of the CSPA. ... Although we recognize that the General Assembly has the authority to abrogate the parol evidence rule, ‘the general assembly will not be presumed to have intended to abrogate a settled rule of the common law unless the language used in a statute clearly supports such intention.’ ...  Our cases have long established that the parol evidence rule bars extrinsic evidence of prior oral representations that contradict the parties’ final written contract, and R.C. 1302.05 has codified this rule of law rather than abrogating it. No plain and express language in the CSPA manifests the General Assembly’s intent to limit the application of the parol evidence rule in the causes of action that the CSPA establishes.” 

“Nor has the General Assembly delegated authority to the attorney general to abrogate the parol evidence rule. ... A rule that is in conflict with law is invalid and unconstitutional because it usurps the General Assembly’s legislative function. Here, Ohio Adm. Code 109:4-3-16(B)(22) provides that an automobile dealer violates the CSPA if it fails to integrate all oral representations and promises made prior to obtaining the consumer’s signature on the written contract into that contract.  To the extent that Ohio Adm. Code 109:4-3-16(B)(22) conflicts with the parol evidence rule as codified by R.C. 1302.05 and allows parol evidence contradicting the final written contract, Ohio Adm. Code 109:4-3-16(B)(22) constitutes an unconstitutional usurpation of the General Assembly’s legislative function and is therefore invalid.”

Chief Justice Thomas J. Moyer and Justices Evelyn Lundberg Stratton, Maureen O’Connor and Robert R. Cupp concurred with Justice O’Donnell’s opinion. Justice Paul E. Pfeifer concurred in judgment only. Justice Judith Ann Lanzinger concurred with the majority in judgment and in the portion of the syllabus holding that the parol evidence rule is applicable to actions brought under the CSPA.

Justice Cupp also entered a separate opinion,  joined by Chief Justice Moyer and Justices Stratton and O’Connor,  stating that in his view the facts of this case distinguish it from some other situations in which the parol evidence rule would not bar the admission of certain extrinsic evidence to support claims made under the CSPA.

He wrote: “In some cases, an exception to the parol evidence rule will apply when it is asserted that the final contract is only a partial integration of the parties’ agreement and that a term that should have been included in the contract was not included.  In certain situations of this type, the plaintiff is permitted to offer extrinsic evidence regarding the alleged missing term. … This case does not implicate any type of partial-integration exception. ... Other common exceptions, which include clarifying a mistaken or ambiguous term and fraud as the inducement to enter into the contract, are not pertinent to the situation here, either. Because this case does not involve an exception, and because the parol evidence rule is relevant to CSPA cases, the parol evidence rule applies here to bar Williams from asserting that the contract price is different from what the contract expressly states. This case is distinguishable from cases involving exceptions to the rule because Williams is trying to directly ‘contradict’ the express terms of the fully integrated contract.”

Contacts
Anthony B. Giardini, 440.244.1811, for Spitzer Autoworld Canton, LLC.

George I. Crawford, 330.452.6773, for Reynold Williams Jr.