Fred S. James & Co. of New England, Inc. v. Hoffmann

• Citation: 24 Mass.App.Ct. 160,507 N.E.2d 269
• Parties: FRED S. JAMES & CO. OF NEW ENGLAND, INC. v. Margaret I. HOFFMANN et al. 1
• Decision Date: 01 July 1987
• Court: Appeals Court of Massachusetts

Page 269

507 N.E.2d 269

24 Mass.App.Ct. 160

FRED S. JAMES & CO. OF NEW ENGLAND, INC. v. Margaret I. HOFFMANN et al. ¹

Appeals Court of Massachusetts,

Suffolk.

Argued May 15, 1986.

Decided May 7, 1987.

Further Appellate Review Denied July 1, 1987.

Robert D. City, Boston, for plaintiff.

Eugene G. Panarese, Boston, for Margaret I. Hoffmann.

Alan G. Miller, Mitchell S. King and Mark P. Bailey, Boston, for Louis P. Hoffmann, submitted a brief.

Before ARMSTRONG, KAPLAN and BROWN, JJ.

ARMSTRONG, Justice.

In the 1930's one Louis H. Hoffmann developed an insurance brokerage business that specialized in providing insurance to customers in the liquor, wine, and beverage businesses. In the 1940's he entered into a commission-sharing arrangement with another insurance brokerage firm, John C. Paige and Company (Paige), whereby Paige would handle the underwriting and accounting services for the Hoffmann accounts, leaving Louis H. Hoffmann more time for customer relations. Louis H. Hoffmann died in 1948, and Paige entered into a similar arrangement with his widow, the defendant Margaret I. Hoffmann, who continued to service the Hoffmann accounts. ²

The defendant Louis P. Hoffmann is the son of Louis H. and Margaret. In the early 1960's he started work for Paige, and in 1965 he and Margaret entered into an agreement with Paige providing that the Hoffmann book of business would become the property of Paige upon Margaret's death and that Paige would pay to Louis P. Hoffmann the commissions that would have been due to Margaret on the Hoffmann book of business for a period of six years thereafter (or for the time, if longer, that Louis P. Hoffmann should remain in Paige's employ).

Paige was acquired by the plaintiff, Fred S. James & Co. of New England, Inc. (James), in 1972, and Louis P. Hoffmann (hereafter, Louis) became James's employee. Like other employees, he was required to, and did, sign an agreement in 1973 not to use for his own benefit confidential information acquired in the course of the employment and, for a period of three years after the termination of his employment, not to solicit or accept business from James's customers. The 1965 agreement between Margaret, Paige, and Louis remained in effect, with James assuming Paige's rights and obligations.

By this time Margaret was essentially out of the business; Louis was servicing the Hoffmann accounts. The arrangement was unsatisfactory to James, which was, it felt, paying both Margaret (through her share of the commissions) and Louis (through his compensation as an employee) for doing the same work. In 1977 the parties negotiated a new contractual arrangement, which negotiations (according to James's representations) were conducted by Louis for Margaret as well as for himself. Two documents resulted: James and Margaret executed an ostensibly two-party agreement (management agreement), whereby James would control ³ the management and servicing of the Hoffmann accounts for six years and at the end of that period would own the accounts; that it would pay Margaret $2,866.08 per month over that period, regardless of the actual commissions generated by the Hoffmann accounts; that Margaret would turn over to James all books and records relating to the accounts; and that Margaret would not solicit or accept business from any of the customers constituting the Hoffmann accounts for the period of the agreement and three years thereafter. The management agreement was undated and was said to take effect as of June 1, 1977. The second document (letter agreement) took the form of a letter from Louis to James, countersigned as "accepted" by James. It recited that it was being executed in connection with the management agreement; that, in consideration of James's executing the management agreement, Louis agreed (1) to the termination of his rights under the earlier contracts with Paige ⁴; (2) that the Hoffmann account customers would be treated as James's customers for purposes of the noncompetition covenant Louis had agreed to in 1973; and (3) that the period of noncompetition would be extended (from three years after Louis's employment with James ended, to three years after the later of that or the final payment to Margaret under the management agreement). The letter agreement was dated January 10, 1978.

In 1979 Louis left the employ of James and established his own insurance firm, the Louis P. Hoffmann Insurance Agency. James filed this action, originally only against Louis, alleging that, beginning in May, 1979, Louis had been violating the terms of the covenant not to compete by soliciting and accepting business from Hoffmann account customers. James ceased making its monthly payments to Margaret after September, 1979, and amended the complaint, naming Margaret as a party, and asking for a declaration that it was no longer obligated to make the payments. Margaret counterclaimed, seeking the payments called for by the management agreement, with interest, as well as damages under G.L. c. 93A. Margaret then filed a motion for summary judgment, advancing the position that, whatever James's rights might be against Louis on the alleged breach of the covenant not to compete, James was obligated as matter of law to make its payments to her. Her motion was allowed, and final judgments under Mass.R.Civ.P. 54(b), 365 Mass. 821 (1974), were entered in her favor on the counts of James's claim and her counterclaim relating to James's contractual liability under the management agreement. This case is before us on James's appeal from those partial judgments.

The defendants, supporting the judge's action, argue that the management contract is unambiguous in its terms and that extrinsic evidence, such as the terms of the letter agreement between James and Louis, is inadmissible to explain or control its terms. ⁵ Massachusetts, however, has adopted the position of Restatement (Second) of Contracts § 214 (1981) that evidence of the contract negotiations and the circumstances of its execution are always admissible to show whether the contract was intended by the parties as an integrated (i.e. final) expression of the terms of their agreement or to show the existence of any uncertainties in the contract's application. See Robert Indus., Inc. v. Spence, 362 Mass. 751, 753-754, 291 N.E.2d 407 (1973); Antonellis v. Northgate Const. Corp., 362 Mass. 847, 850-851, 291 N.E.2d 626 (1973); Wang Laboratories, Inc. v. Docktor Pet Centers, Inc., 12 Mass.App.Ct. 213, 219-221, 422 N.E.2d 805 (1981); Alexander v. Snell, 12 Mass App.Ct. 323, 324-325, 424 N.E.2d 262 (1981). The cases relied on by defendants (see note 5, supra ) are distinguishable for the reason stated in Roberts Indus., Inc. v. Spence, 362 Mass. at 754, 291 N.E.2d 407 ("Expressions in our cases to the effect that evidence of circumstances can be admitted only after an ambiguity has been found on the face of the written instrument have reference to...