Doherty v. Doherty Ins. Agency, Inc., 88-1626

• Decision Date: 10 February 1989
• Docket Number: No. 88-1626,88-1626
• Citation: 878 F.2d 546
• Parties: Joseph B. DOHERTY, Sr., Plaintiff, Appellee, v. DOHERTY INSURANCE AGENCY, INC., Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 546

878 F.2d 546

Joseph B. DOHERTY, Sr., Plaintiff, Appellee, v. DOHERTY INSURANCE AGENCY, INC., Defendant, Appellant.

No. 88-1626.

United States Court of Appeals First Circuit.

Heard Feb. 10, 1989.

Decided June 23, 1989.

Frank J. Shealey, Chatham, Mass., for defendant, appellant.

Sheldon H. Ganz, Boston, Mass., with whom Karen Dean-Smith was on brief, for plaintiff, appellee.

Before CAMPBELL, Chief Judge, BOWNES and BREYER, Circuit Judges.

LEVIN H. CAMPBELL, Chief Judge.

A district court jury found for plaintiff Joseph Doherty on his contract claim for monthly retirement payments against defendant Doherty Insurance Agency ("Insurance"). The latter now contends that the district court erred in denying its motions for a directed verdict, judgment notwithstanding the verdict and a new trial; that Doherty's claim was barred by the statute of frauds; and that the district court abused its discretion by commenting to the jury about the evidence. Finding no merit to these contentions, we affirm.

I.

In 1978, Joseph Doherty retired from his family business at the age of 68, after 32 years of service. On a monthly basis thereafter, Insurance provided Doherty with retirement benefits in a stipulated amount. In 1982, however, family relations fractured, and a newly elected board of directors voted to terminate Doherty's retirement payments. Soon after the checks ceased to arrive, Doherty brought this diversity action in the United States District Court for the District of Massachusetts, alleging breach of Insurance's oral promise to pay retirement benefits for Doherty's remaining life. The parties agreed that Massachusetts law applied. See Moores v. Greenberg, 834 F.2d 1105, 1107 n. 2 (1st Cir.1987) (where parties agree what substantive law applies, federal court sitting in diversity jurisdiction should comply).

A four-day jury trial ensued. The district court denied Insurance's motions for a directed verdict made at the close of Doherty's case, and again after the close of all the evidence. A special verdict form containing three interrogatories was put to the jury. The first inquired whether,

Before the defendant corporation was organized in June, 1956, did James Doherty on behalf of the partnership of William and James Doherty promise plaintiff Joseph Doherty that if Joseph joined them in their business in Andover and worked with them for the balance of his working days, his compensation would include retirement benefits for his remaining life?

The jury answered "yes" and went on to the next question:

Before the defendant corporation was organized in June, 1956, did plaintiff promise in exchange to join William and James Doherty in their business in Andover and work with them for the balance of his working days?

The jury also answered this question "yes" and went on to the final question:

Did the defendant corporation [Insurance] assume the aforesaid agreement between plaintiff and the partnership of William and James Doherty?

The jury responded "yes." The court entered judgment for Doherty in accordance with the jury's verdict, and denied Insurance's post-trial motions for judgment notwithstanding the verdict and for a new trial.

II.

Insurance asserts that the district court erred in denying Insurance's motions for a directed verdict and for judgment notwithstanding the verdict. The court erred only if all the evidence, viewed most favorably to Doherty, would not permit reasonable jurors to find for him. deMars v. Equitable Life Assurance Society of the United States, 610 F.2d 55, 57 (1st Cir.1979). We set forth the facts in the light most favorable to Doherty.

Joseph Doherty is one of five Doherty children: four sons--John, Bill, Joe (the plaintiff), and Jim--and a daughter, Margaret. In the mid-1930s, the second son, Bill, founded a small insurance and real estate agency in Andover, Massachusetts. In 1937, Jim joined the business. In 1946, the two brothers formed an unincorporated partnership. Most of the company's business was insurance sales, but the brothers occasionally would also sell real estate. In 1955, Bill discovered that he was seriously, perhaps terminally, ill. Concerned that Jim would be left to run the family business alone, Bill and Jim sought the help of other family members. They first asked John, who refused to join the business. They then turned to Joe.

In 1955, Joe Doherty was 45 years old. He had earned a Bachelor's degree from Boston College, and later a Master's degree in Education from Harvard University. In 1951, he and his family moved to Easthampton, Connecticut, where he served as the superintendent of schools. By 1955, Joe had built up 18 years of equity in school retirement plans.

In September or October of 1955, Jim called Joe and arranged to meet with him at the Ocean House, in Swampscott, Massachusetts, where New England school superintendents were holding an annual meeting. After the meeting, the two brothers sat on the back steps of the Ocean House, and Jim told Joe about Bill's illness, and asked Joe to join the family business. Jim related the full terms of the employment offer: salary, a company car, and insurance. Joe asked Jim about retirement. Jim responded that retirement would be taken care of, and agreed that Joe would retire at salary.

Joe took several months to consider Jim's offer. In the meantime, he received an offer to serve as superintendent of schools in a New Jersey district, a position which would have been more challenging, with greater potential for advancement, than his position in Easthampton. He also was offered a renewal of his contract in Easthampton. In mid-February of 1956, Joe prepared a list of the "pros" and "cons" of joining in the family business in Andover. Among the "cons" listed was "all retirement benefits wasted," but among the "pros" was "improved retirement plan." Sometime in March of 1956, Joe informed his brothers that he had decided to accept their offer. The brothers and their families met at a restaurant in Sturbridge, Massachusetts, for a luncheon to celebrate Joe's decision. During the lunch, Joe removed the list from his pocket, and told his brothers that he had prepared a "pros and cons list." Subsequently, Joe and his family moved to Andover, and he began working with his brothers in July 1956.

Upon Joe's move to Andover, the brothers formed two corporations, Doherty Insurance Agency, Inc. ("Insurance") and Doherty Realty Agency, Inc. ("Realty"). ¹ Insurance was the corporate successor to Jim's and Bill's earlier partnership. Bill and Jim were the sole shareholders of Insurance, but the three brothers held equal shares in Realty. The three brothers served as directors for each of the two corporations. Joe was elected president of both corporations. The two corporations shared a small office in Andover.

Upon Joe's arrival, the three brothers agreed that the first order of business was for Joe to obtain a license to sell insurance. Joe was tutored for his insurance exam, and after obtaining his insurance license late in the summer of 1956, attended an intensive five-week course about insurance. Joe subsequently became a real estate broker and an appraiser, and worked primarily in the real estate side of the business, but throughout the course of his employment he attempted to sell insurance and performed acts which benefited Insurance as well as Realty, including signing insurance policies, signing corporate checks, referring business to Insurance, and obtaining financing for Insurance. Joe enjoyed a successful career in the real estate business. In later life, he held many prominent positions in local, regional and national real estate associations. He was elected president of the National Association of Realtors in 1974. For the first few months of his employment, Joe was employed by Insurance, but received his salary from Realty. From late 1956 until Joe's retirement in 1978, however, Insurance paid Joe's weekly salary.

The two corporations' operations were merged in many respects. At all times, the two corporations were located in the same office space. Insurance's employees performed all clerical work for both corporations. The financial accounting of the two corporations was controlled by Jim, who used the same accountant to prepare financial reports and tax returns for both corporations. Although Joe worked primarily in the real estate business, most matters pertaining to his employment were handled by Insurance. In addition to receiving his salary from Insurance, Joe was covered under Insurance's medical plan, had life insurance through Insurance, and was listed as a full-time employee of Insurance. The three brothers shared equally in annual profit sharing payments received by Insurance from insurance companies for whom Insurance wrote policies. Joe drove a company automobile leased for him by Realty, which bore signs front and back advertising "Doherty Realty and Insurance." For a period of time, Insurance charged Joe's salary to Realty as a "management fee." Realty never repaid the fee, which simply was carried on Insurance's financial books as an asset and on Realty's as a liability. ² The rationale underlying this arrangement was that Realty needed capital and, in Jim's words, "we did business on a family basis and we did not worry too much about keeping an accurate [account of what was] owed." After the arrangement was abandoned, and at least until 1978, Realty owed Insurance $115,000 to pay for Joe's services.

In 1970, Bill retired from Insurance at full salary. In 1975, just before Joe's 65th birthday, Jim "reminded" Joe that Joe was eligible for retirement on the same terms as those enjoyed by Bill. Joe retired on January 1, 1978. Initially, he received payments in the amount of $2,000 per month, on checks drawn on Insurance's corporate bank account. Later, the amount was reduced slightly to an amount representing Joe's salary less any social security benefits he received. Jim...