Goldsmith v. Diamond Shamrock Corp.

• Decision Date: 28 June 1985
• Docket Number: No. 84-2269,84-2269
• Citation: 767 F.2d 411
• Parties: Robert O. and Katherieen GOLDSMITH, Appellants, v. DIAMOND SHAMROCK CORPORATION, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 411

767 F.2d 411

2 Fed.R.Serv.3d 966

Robert O. and Katherieen GOLDSMITH, Appellants, v. DIAMOND SHAMROCK CORPORATION, Appellee.

No. 84-2269.

United States Court of Appeals,

Eighth Circuit.

Submitted March 15, 1985.

Decided June 28, 1985.

Jan K. Nielsen, Fort Smith, Ark., for appellants.

G. Alan Wooten, Fort Smith, Ark., for appellee.

Before JOHN R. GIBSON, Circuit Judge, FLOYD R. GIBSON, Senior Circuit Judge, and BOWMAN, Circuit Judge.

JOHN R. GIBSON, Circuit Judge.

Robert and Katherieen Goldsmith brought suit against Diamond Shamrock Corporation seeking payment of a draft given to them by Diamond upon execution of an oil and gas lease. They now appeal from a judgment in favor of Diamond entered on a jury verdict following a second trial. The Goldsmiths obtained a verdict in their favor at the first trial, and Diamond filed only a motion for judgment notwithstanding the verdict. The district court, however, granted Diamond a new trial on the ground that Diamond received inadequate notice that, under the Goldsmiths' theory of the case, it would bear the burden of proof. The Goldsmiths argue that the district court erred in thus granting a new trial, either in that it acted beyond its authority or in that it abused its discretion. We reverse and remand with directions that the district court enter judgment on the verdict rendered in the first trial in the amount of $35,775.

In March 1982 Diamond Shamrock Corporation, through its agent Steve Brown, sought a "top lease" of oil and gas rights to certain property owned by Robert and Katherieen Goldsmith, such lease to take effect on August 31, 1982, when the existing lease of such rights to another oil company expired. The top lease was executed on April 5, 1982, at which time Diamond gave the Goldsmiths a signing bonus of $39,750 in two drafts. The first draft of $3,975 was due immediately and was paid by Diamond while the draft for the remaining ninety percent was due November 30, 1982. The Goldsmiths testified that they had understood payment of the second draft to be contingent only upon the expiration of the existing lease with no drilling by that oil company. Brown, however, testified that the agreement executed had just been an option for a lease such that Diamond was obligated to pay the second draft only if, within sixty days of the August 31 expiration of existing lease, it decided to pick up its option.

When Diamond ultimately refused to pay the second draft, the Goldsmiths filed this action seeking the amount due of $35,775. ¹ The trial was held on May 7, 1984. Under the Goldsmiths' theory of recovery, introduction of the draft into evidence established their entitlement to the proceeds thereof and shifted the burden to Diamond to prove an affirmative defense to payment. ² Diamond, however, requested that the jury be instructed that the Goldsmiths had the burden of proving their right to the $35,775 under the lease agreement. The district court accepted Diamond's position, found the lease agreement ambiguous so as to give rise to a jury question as to its meaning, and submitted the interrogatory "Are plaintiffs entitled to the proceeds of the draft according to the agreement of the parties?"

The jury answered this question "yes," and Diamond the next day filed a motion for judgment notwithstanding the verdict on the ground that, even assuming ambiguity, no possible interpretation of the agreement would support the result sought by the Goldsmiths. About two weeks later, however, the district court wrote a letter to the parties saying it had become "somewhat convinced" that the case should have been submitted in the manner urged by the Goldsmiths. The court suggested that no matter how the agreement were interpreted Diamond would not thereby have established an affirmative defense, and it asked the parties to file supplemental briefs on how the court's decision on the law thus should affect Diamond's motion for judgment notwithstanding the verdict. Diamond in its response for the first time argued that if the burden of proof were placed on it it was entitled to a new trial because it had inadequate notice of that burden and would have presented its case differently.

The district court again accepted Diamond's position. On June 22, 1984, it issued an order granting the new trial, and in a letter to the parties it explained,

In any event, the court believes that the case might very well have been tried in a different manner and different evidence adduced if it had proceeded in what the court now believes to be the proper manner. For this reason, the court simply does not believe that it is "fair" to simply overrule the motion for a judgment n.o.v. and allow the motion to stand.

The court stated that the Goldsmiths' contentions as to the effect of the draft and the placement of the burden of proof were not obvious from their complaint but only became apparent when they submitted their proposed instructions. The court then addressed its remedy:

Rule 50 clearly provides that the court has discretion to, in effect, treat the motion as a motion for a new trial and order one rather than grant judgment if it believes that the defect in the proof might be remedied on a second trial, or if needed evidence was ruled out by some error of the court. See discussion in 9 Wright & Miller, Federal Practice and Procedure: Civil Sec. 2538. If the law is, as we now believe it to be, that [Diamond] is required to show a defense to payment or lose, the court believes that it was only fair that [Diamond] be so advised early in the trial so that [it] could attempt to meet that burden. A new trial will be granted and [Diamond] will be given an opportunity to do so.

Finally, as an additional ground for the new trial, the district court declared the verdict against the weight of the evidence.

At the second trial the jury, although instructed that Diamond had to prove an affirmative defense to payment of the draft, found for Diamond, and the Goldsmiths appeal from the judgment entered on that verdict. As a threshold matter we observe that Diamond has not argued before us that, should we find the grant of a new trial improper, it is still entitled to judgment notwithstanding the verdict in the first trial. We may not consider issues not raised on appeal. E.g., Borough v. Duluth, Missabe & Iron Range Railway, 762 F.2d 66, 68 n. 1 (8th Cir.1985); Kizzier Chevrolet Co. v. General Motors Corp., 705 F.2d 322, 325 n. 2 (8th Cir.), cert. denied, --- U.S. ----, 104 S.Ct. 153, 78 L.Ed.2d 141 (1983).

I.

The district court in finding authority in Rule 50 of the Federal Rules of Civil Procedure for its grant of a new trial apparently relied upon the language that "[i]f a verdict was returned the court may allow the judgment to stand or may reopen the judgment and either order a new trial or direct the entry of judgment as if the requested verdict had been directed." Fed.R.Civ.P. 50(b). This language, however, by its very terms gives a court discretion to order a new trial absent a motion therefor only where the moving party otherwise would have been entitled to judgment notwithstanding the verdict. Peterman v. Chicago, Rock Island & Pacific Railroad, 493 F.2d 88, 92 (8th Cir.) (citing Jackson v. Wilson Trucking Corp., 243 F.2d 212 (D.C.Cir.1957) ), cert. denied, 417 U.S. 947, 94 S.Ct. 3072, 41 L.Ed.2d 667 (1974); see 9 C. Wright & A. Miller, Federal Practice and Procedure Sec. 2538, at 606 (1971). The discretion thus granted is addressed to the protection of the party whose judgment can be set aside to allow that the failure of proof, when only technical or when caused by error of the court or change in the law, be corrected. E.g., Lucas Hoist & Equipment Co. v. Eaton Corp., 76 F.R.D. 661 (W.D.Pa.1977) (when law on burden of proof was overruled during pendency of posttrial motions such that defendant became entitled to judgment notwithstanding the verdict, district court had authority instead to order new trial to allow plaintiff the opportunity to meet new burden). ³

When, as here, the district court believes the moving party not entitled to judgment notwithstanding the verdict, respect for the role of the jury requires strict compliance with the limits established in the Federal Rules of Civil Procedure as to when and why such a verdict otherwise may be disturbed. Jackson, 243 F.2d at 217. Thus, we have held that a district court in such circumstances lacks the power to grant a new trial unless it acts on the basis of a motion of a party pursuant to Rule 59(b) of the Federal Rules of Civil Procedure or sua sponte within ten days pursuant to Rule 59(d) of the Federal Rules of Civil Procedure. Peterman, 493 F.2d at 91; see 9 C. Wright & A. Miller, supra, at 606-07. Neither avenue was available to the district court in this case.

Diamond suggests two courses by which we might avoid this result. First, Diamond urges that we adopt the argument of Chief Justice (then Judge) Burger in his dissent in Jackson, 243 F.2d at 217, that a party moving only for judgment notwithstanding the verdict and found not entitled thereto may still be granted a new trial on the basis that the verdict was against the weight of the evidence. See 5A J. Moore & J. Lucas, Moore's Federal Practice p 50.11, at 50-99 & n. 8 (1985). While we found it unnecessary to reach this argument in Peterman because the new trial order there was based only on instructional error and not, as here, on weight of the evidence in the alternative, see 493 F.2d at 93, we observe that then Judge Burger's position has been rejected by two other circuits, Kain v. Winslow Manufacturing, 736 F.2d 606, 608-09 (10th Cir.1984), cert. denied, --- U.S. ----, 105 S.Ct. 1360, 84 L.Ed.2d 381 (1985); Alderman v. Tandy Corp., 720 F.2d 1234, 1236-37 (11th Cir.1983), and by a prominent treatise, 9 C. Wright & A. Miller, supra, at 607 n. 8, as well as by the majority in Jackson, supra. Diamond cites no case decided in conformity with...