• Key point. Under the “parol evidence rule,” legal documents such as leases and contracts cannot be altered, changed, or contradicted by subsequent oral testimony, even if that testimony reveals an actual understanding or agreement among the parties to the document that is different from what is expressed in the document itself.

An Ohio court ruled that a lease of oil and gas rights in church property could not be revised through oral testimony since the meaning of the lease was clear. In 1949 the owners of two tracts of property (A and B) leased the oil and gas rights in their properties to a third party (C). The lease contained a handwritten provision stating, “This agreement to be in force for two years from above date mentioned.” By 1960, C had had assigned its rights under the 1949 lease to another person (D). In 1967, the church purchased the land from A and B, and in 1990 the church leased the oil and gas rights in these properties to E. As a result, E and D held competing claims to the oil and gas rights in the church’s property. D’s claims were based on the rights conveyed by the 1949 lease, and E’s claims were based on the rights conveyed by the 1990 lease from the church. In 1996, E drilled an oil well on the church’s property. D immediately filed a lawsuit asking a court to declare it to be the sole lessee of the oil and gas rights in the church’s property. The church argued that all oil and gas rights transferred pursuant to the 1949 lease expired two years later, in 1951, according to the plain language of the lease, and therefore C had no legal rights to assign to D in 1960. D claimed that the parties to the 1949 lease intended that if a well were drilled within two years, the lease would continue in effect as long as the well produced oil. A trial court agreed that the two-year term mentioned in the 1949 lease only applied to the initial drilling of a well. The trial court concluded that the original parties to the 1949 lease intended that if a well were drilled within two years, the lease would continue in effect for as long as the well produced oil. Therefore, the trial court found that the oil and gas rights in the church’s property were owned by D pursuant to the 1949 lease. E and the church appealed.

A state appeals court concluded that there was nothing ambiguous about the two-year expiration clause in the 1949 lease, and therefore the trial court should not have allowed testimony regarding the intentions of the parties to that lease. The court applied the so-called “parol evidence rule,” which prohibits the civil courts from admitting evidence to change the plain meaning of leases, contracts, or other written instruments. The court concluded, “Because the [testimony of the parties to the 1949 lease] should not have been admitted into evidence, this court’s analysis is restricted to the language contained in the 1949 lease. As noted above, the language contained in the 1949 lease clearly caused it to expire in 1951 and failed to include any provisions for an extension of time. If the parties had intended to extend the lease term based on the drilling of a well and the production of oil, they should have included language to that effect. Therefore, [D] has no claim to the oil and gas rights in the church property ….”

Application. This case illustrates an important point with which church leaders should be familiar. Under the so-called parol evidence rule, oral testimony will not be admissible in court to alter, vary, or contradict the plain meaning of leases, contracts, or other written instruments. What is the significance of this rule to church leaders? It means that church leaders should ensure that all important terms are included in legal documents. Sometimes church leaders omit crucial terms from legal documents, thinking that “it won’t matter” since the parties knew what was intended and can later testify as to the “true meaning” if necessary. As this case illustrates, such thinking is dangerous. Church leaders should carefully review any legal instrument before signing it and ensure that all essential terms are clearly stated. If something is omitted, have the document rewritten before signing it. Dalton v. Belden & Blake Corporation, 1999 WL 74627 (Ohio App. 1999).

© Copyright 2000 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m21 c0600