Gem Corrugated Box Corp. v. NATIONAL KRAFT CONTAIN. CORP., 676
| Decision Date | 01 June 1970 |
| Docket Number | 677,No. 676,33616.,Dockets 33573,676 |
| Parties | GEM CORRUGATED BOX CORPORATION, Plaintiff-Appellee, v. NATIONAL KRAFT CONTAINER CORPORATION and St. Regis Paper Company, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Second Circuit |
Samuel Rubin, New York City (Conrad & Smith, New York City, on the brief), for plaintiff-appellee.
Richard G. McGahren, New York City (LeBoeuf, Lamb, Leiby & MacRae, New York City, on the brief), for defendants-appellants.
Before KAUFMAN and FEINBERG, Circuit Judges, and TIMBERS, District Judge.*
Defendants National Kraft Container Corporation and St. Regis Paper Company appeal from a judgment of the United States District Court for the Southern District of New York, Edward J. Dimock, District Judge, entered after a jury trial, awarding plaintiff Gem Corrugated Box Corporation $19,278 in an action for breach of contract for the sale of National Kraft stock to plaintiff.1 The chief issue on appeal is whether the trial court was correct in its application of controlling New York law as to parol evidence in admitting evidence of an oral agreement for the sale of stock when a written contract between the parties for the sale of corrugated paper products to plaintiff included an express provision that it contained the entire agreement of the parties. We hold that the trial court was correct in admitting the parol evidence, as well as in its other rulings raised on this appeal. We affirm.
Upon the issues raised by the only cause of action submitted to the jury — one for breach of contract for the sale of stock — the jury could have found the following pertinent facts, inter alia, in support of its special verdict:
Plaintiff was engaged in the New York metropolitan area as a jobber in the business of manufacturing, processing and selling corrugated paper products, principally boxes and other containers. In the fall of 1958, plaintiff and a number of other jobbers of corrugated boxes found themselves at a low economic ebb. They consulted one Samuel Kipnis, a person with many years of experience in the field, to explore possible ways of improving the group's financial condition.
Kipnis first proposed to the group the formation of a new corporation, in effect by merger or consolidation of the individual jobbing concerns, with each jobber contributing its business and receiving in turn a proportionate percentage of the new corporation's stock. The principal advantage of participating in the larger collective entity would be increased leverage in bargaining over purchase prices of unfinished paper materials. Kipnis engaged accountants to analyze the status of each interested individual jobber. Plaintiff cooperated in furnishing requested information, gave access to its books, and contributed to payment for the accountants' services.
On January 7, 1959, at a meeting with the jobbers, Kipnis represented that he had a commitment from St. Regis for supply of corrugated box materials at favorable prices. In the ensuing weeks, discussion continued as to the details of participation by the jobbers in the proposed new corporation.
On February 20, 1959, Kipnis organized National Kraft as a Delaware corporation.
On July 10, 1959, Kipnis met with the jobbers to announce a revised plan under which National Kraft and the jobbers would retain their individual identities; National Kraft would obtain the advantage of a long-term materials purchase contract with St. Regis; and each jobber would become a stockholder of National Kraft, able to purchase as many shares as it wished upon entering into a contract to purchase its corrugated paper products requirements from National Kraft. The continuing benefits to the jobber would be primarily its status as a stockholder in a corporation with a favorable long-term raw materials purchase contract and an established market for sale of finished products.
Plaintiff maintained its interest in the new plan. During the following months discussions of particulars continued. National Kraft during this period was equipping a plant in New Jersey which was to become its principal place of business.
On November 25, 1959, plaintiff entered into a written contract with National Kraft to purchase its box materials requirements from National Kraft for a period of five years. The contract price was not attractive; consummation of the stock purchase agreement was the real inducement to enter into the requirements contract. At the urging of Kipnis, however, consummation of the stock purchase transaction was postponed. The written requirements contract included a provision that it contained the entire agreement of the parties and was subject to amendment only in writing.
Further meetings took place in connection with the stock purchase phase of the overall plan. Plaintiff was discomfited to learn that the bargain price of "cost" to Kipnis at which it was to purchase National Kraft shares reflected valuations placed by National Kraft upon Kipnis' transfers to the corporation of real estate and the St. Regis contract, as well as actual cash investment by Kipnis; but eventually, in March of 1960, plaintiff communicated its intention of purchasing 7,000 shares. The requested stock was never delivered to plaintiff.
On August 16, 1960, St. Regis acquired all of the stock of National Kraft in exchange for shares of St. Regis stock.
The essential issue presented on the instant appeal is whether the New York common law parol evidence rule2 precluded admission of evidence of the oral agreement for sale of National Kraft stock to plaintiff.
The controlling authority relied upon by defendants is Mitchill v. Lath, 247 N.Y. 377, 380-81, 160 N.E. 646, 647 (1928), in which the Court of Appeals stated:
"Under our decision before such an oral agreement as the present is received to vary the written contract, at least three conditions must exist: (1) The agreement must in form be a collateral one; (2) it must not contradict express or implied provisions of the written contract; (3) it must be one that parties would not ordinarily be expected to embody in the writing, or, put in another way, an inspection of the written contract, read in the light of surrounding circumstances, must not indicate that the writing appears `to contain the engagements of the parties, and to define the object and measure the extent of such engagement.\' Or, again, it must not be so clearly connected with the principal...
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