Brawthen v. H & R Block, Inc.

• Decision Date: 15 October 1975
• Citation: Brawthen v. H & R Block, Inc., 124 Cal.Rptr. 845, 52 Cal.App.3d 139 (Cal. App. 1975)
• Court: California Court of Appeals
• Parties: Elwin T. BRAWTHEN, Plaintiff and Respondent, v. H & R BLOCK, INC., Defendant and Appellant. Civ. 35449.

Page 845

124 Cal.Rptr. 845

52 Cal.App.3d 139

Elwin T. BRAWTHEN, Plaintiff and Respondent, v. H & R BLOCK, INC., Defendant and Appellant.

Civ. 35449.

Court of Appeal, First District, Division 3, California.

Oct. 15, 1975.

Hearing Denied Dec. 11, 1975.

Wilson, Mosher & Sonsini by John W. Clark, Palo Alto, for plaintiff and respondent.

Hoge, Fenton, Jones & Appel, Inc. by Charles H. Brock, San Jose, for defendant and appellant.

HAROLD C. BROWN, Acting Presiding Justice.

Appellant H & R Block, Inc., appeals from a judgment awarding respondent the sum of $201,284 as damages for wrongful termination of an employment agreement.

H & R Block, Inc., is a corporation engaged in a nationwide business of preparing tax returns. The local offices are located in the various states and are operated either by franchise or employee contracts. The written employment agreement under which respondent operated a local office for H & R Block, Inc., contained a provision which provided for termination by either party upon the requisite notice. ¹

At the time of the execution of this agreement, it was decided that respondent Brawthen would open an H & R Block Company office in Bakersfield, California, requiring a move of the Brawthen family from Minneapolis. During the contract discussions, Mrs. Brawthen asked Richard Bloch what guarantee they would have that they would not be terminated after they went out to Bakersfield and developed the business over a period of years. Mr. Bloch said that they had the word of Henry and Richard Bloch that they never terminated a contract and did not terminate contracts. Mr. Bloch said that if Brawthen did a good job in the area, he would not be terminated, and added that when a contract was changed, somebody got hurt and they did not want anybody to get hurt. Mr. Bloch also added that the business was a wonderful family opportunity because it was a business plaintiff could treat as his own and pass on to his children.

In the fall of 1962, Brawthen sold his resort and his part-time bookkeeping and accounting service and moved his family to California, to San Mateo rather than Bakersfield, because of an agreed contract change. He opened his first H & R Block office in San Mateo for the 1963 tax season. For the tax season of 1964, respondent had offices open in San Mateo, Redwood City and Palo Alto. In 1966, he opened his fourth office in Mountain View, and for the first time found it unnecessary to resort to outside employment to support his family.

During the tax season of 1967, plaintiff received a document from defendant known as 'Bull Sheet No. 104.' The Bull Sheet is a publication sent from defendant's corporation headquarters in Kansas City to managers of H & R Block offices. It contained news and company policy. Bull Sheet 104, entitled 'Rumors,' stated that the only reason a manager, either franchisee or employee, needed to worry about having his contract terminated was in the case of gross infractions of the contract or the Policy and Procedure Manual, and further that no manager needed to worry about his contract if he was doing a good, honorable, conscientious job to best serve the public and following the principles outlined in the Policy and Procedure Manual.

In November of 1967, the company decided to change the employment contracts to provide for a sliding scale of commission rates in lieu of the fixed commission rate which, at least in Mr. Brawthen's contract, was 50 percent of net profits. Brawthen refused to accept the change and brought suit in September 1968 for declaratory relief. H & R Block terminated his employment contract as of April 1969, and in a supplemental complaint, plaintiff alleged a wrongful termination and claimed damages.

Mr. Bloch at trial denied making any promises regarding permanence to Mr. Brawthen. He admitted, however, that he had previously testified in another trial that he told all his managers that the contract would be theirs for life as long as they did a good job.

The first trial of this matter ended with an order granting nonsuit. Mr. Brawthen appealed and the judgment was reversed on the ground that the trial court erred in not considering extrinsic evidence to determine whether or not the written employment agreement constituted an integrated agreement. (Brawthen v. H & R Block, Inc. (1972) 28 Cal.App.3d 131, 104 Cal.Rptr. 486.)

In Brawthen, the court explained that the Supreme Court in Masterson v. Sine (1968) 68 Cal.2d 222, 65 Cal.Rptr. 545, 436 P.2d 561, had repudiated the older 'face of the document' rule in which the question of integration had to be determined from the written document alone. Extrinsic evidence as well as the document must be considered. 'The language of the writing is an important consideration, particularly where it recites that all understandings of the parties are contained therein; these are the so-called words of 'integration' (citation). But the determination may not be made from the writing alone (citations); the proffered collateral parol agreement itself must be considered, as well as the circumstances surrounding the transaction, and its subject matter, nature and object. (Citations.)' (Brawthen v. H & R Block, Inc., supra, 28 Cal.App.3d at p. 137, 104 Cal.Rptr. at p. 490.)

The retrial was held in two parts. In the first portion, the court, without a jury, considered the proffered parol evidence bearing on the integration issue. The court ruled that it could not be said as a matter of law that the document was integrated and, therefore, the offered evidence would be admitted. In the second phase of the proceedings, the parol evidence was admitted and the jury instructed that they were to decide what the terms of the contract between the parties were based upon the oral and written evidence. ²

The appellant first contends that the trial court erred in refusing to allow the jury to redetermine the question of integration. ³ Appellant recognizes that the court in Brawthen held that 'Whether or not the writing constitutes an integrated agreement is a question of law for the court.' (28 Cal.App.3d at p. 137, 104 Cal.Rptr. at p. 490.) Appellant, however, argues that if the court decides that it cannot be said as a matter of law that the parties intended an integrated agreement, the evidence is admissible and the jury gets a chance to decide the integration question itself.

Appellant argues that the proper procedure is that set forth in Evidence Code section 403. This section provides that where the relevancy of the proffered evidence depends on the existence of a preliminary fact and in certain other specified situations, the court will first determine if there is evidence sufficient to sustain a finding of the existence of the preliminary fact and if the court admits the proffered evidence '(m)ay, and on request shall, instruct the jury to determine whether the preliminary fact exists and to disregard the proffered evidence unless the jury finds that the preliminary fact does exist.' (Evid.Code, § 403, subd. (c)(1).) Section 403, as well as section 404, are exceptions to the rule of finality of a court's decision on a question of law. (People v. MacIntosh (1968) 264 Cal.App.2d 701, 708, 70 Cal.Rptr. 667.) The comments to section 403 explain: 'The preliminary fact questions listed in subdivision (a), or identified elsewhere as matters to be determined under the Section 403 standard, are not finally decided by the judge because they have been traditionally regarded as jury questions. The questions involve the credibility of testimony or the probative value of evidence that is admitted on the ultimate issues. It is the jury's function to determine the effect and value of the evidence addressed to it. Evidence Code § 312. Hence, the judge's function on questions of this sort is merely to determine whether there is evidence sufficient to permit a jury to decide the question. The 'question of admissibility . . . merges imperceptibly into the weight of the evidence, if admitted.' (Citation). If the judge finally determined the existence or nonexistence of the preliminary fact, he would deprive a party of a jury decision on a question that the party has a right to have decided by the jury.' (Comment--Assembly Committee on Judiciary.)

The question of whether a contract is 'integrated' is not one to which section 403 applies. It is clearly not one of those 'traditionally regarded as jury questions.' (See Kaufman & Broad Bldg. Co. v. City & Suburban Mortg. Co. (1970) 10 Cal.App.3d 206, 215--216, 88 Cal.Rptr. 858; Witkin, Cal.Evidence (2d ed.) § 721(3), p. 668.) The matters to which the court must address itself in determining whether the evidence of an oral agreement should go to the jury are such questions as (1) whether the written agreement appears to state a complete agreement; (2) whether the alleged oral agreement directly contradicts the writing; (3) whether the oral agreement might naturally be made as a separate agreement; (4) whether the jury might be misled by the introduction of the parol testimony. (Masterson v. Sine, supra, 68 Cal.2d 222, 225--228, 65 Cal.Rptr. 545, 436 P.2d 561.)

With respect to preliminary fact determinations not governed by section 403 or 404, section 405 applies. This section provides that:

'(a) When the existence of a preliminary fact is disputed, the court shall indicate which party has the burden of producing evidence and the burden of proof on the issue as implied by the rule of law under which the question arises. The court shall determine the existence or nonexistence of the preliminary fact and shall admit or exclude the proffered evidence as required by the rule of law under which the question arises.

'(b) If a preliminary fact is also a fact in issue in the action:

'(1) The jury shall not be informed of the court's determination as to the existence or nonexistence of the preliminary fact.

'(2) If the proffered evidence is admitted, the jury shall not be...