Lee v. Joseph E. Seagram & Sons, Inc.

• Decision Date: 15 March 1977
• Docket Number: D,No. 386,386
• Citation: 552 F.2d 447
• Court: U.S. Court of Appeals — Second Circuit
• Parties: Harold S. LEE et al., Plaintiffs-Appellees, v. JOSEPH E. SEAGRAM & SONS, INC., Defendant-Appellant. ocket 76-7262.

Page 447

552 F.2d 447

Harold S. LEE et al., Plaintiffs-Appellees, v. JOSEPH E. SEAGRAM & SONS, INC., Defendant-Appellant.

No. 386, Docket 76-7262.

United States Court of Appeals Second Circuit.

Argued Dec. 8, 1976.

Decided March 15, 1977.

MacDonald Flinn, New York City (E. Miles Prentice, III, Robert W. Mannix and White & Case, New York City, of counsel), for defendant-appellant.

Malcolm A. Hoffmann, New York City (Edward A. Woolley, Robert W. Biggar, Robert C. Agee, Bernard Zucker, Andrew N. Singer and Law Firm of Malcolm A. Hoffmann, New York City, of counsel), for plaintiffs-appellees.

Before MEDINA, OAKES and GURFEIN, Circuit Judges.

GURFEIN, Circuit Judge:

This is an appeal by defendant Joseph E. Seagram & Sons, Inc. ("Seagram") from a judgment entered by the District Court, Hon. Charles H. Tenney, upon the verdict of a jury in the amount of $407,850 in favor of the plaintiffs on a claim asserting common law breach of an oral contract. The court also denied Seagram's motion under Rule 50(b), Fed.R.Civ.P., for judgment notwithstanding the verdict. Harold S. Lee, et al. v. Joseph E. Seagram and Sons, 413 F.Supp. 693 (S.D.N.Y.1976). It had earlier denied Seagram's motion for summary judgment. The plaintiffs are Harold S. Lee (now deceased) and his two sons, Lester and Eric ("the Lees"). Jurisdiction is based on diversity of citizenship. ¹ We affirm.

The jury could have found the following. The Lees owned a 50% interest in Capitol City Liquor Company, Inc. ("Capitol City"), a wholesale liquor distributorship located in Washington, D.C. The other 50% was owned by Harold's brother, Henry D. Lee, and his nephew, Arthur Lee. Seagram is a distiller of alcoholic beverages. Capitol City carried numerous Seagram brands and a large portion of its sales were generated by Seagram lines.

The Lees and the other owners of Capitol City wanted to sell their respective interests in the business and, in May 1970, Harold Lee, the father, discussed the possible sale of Capitol City with Jack Yogman ("Yogman"), then Executive Vice President of Seagram (and now President), whom he had known for many years. Lee offered to sell Capitol City to Seagram but conditioned the offer on Seagram's agreement to relocate Harold and his sons, the 50% owners of Capitol City, in a new distributorship of their own in a different city.

About a month later, another officer of Seagram, John Barth, an assistant to Yogman, visited the Lees and their co-owners in Washington and began negotiations for the purchase of the assets of Capitol City by Seagram on behalf of a new distributor, one Carter, who would take it over after the purchase. The purchase of the assets of Capitol City was consummated on September 30, 1970 pursuant to a written agreement. The promise to relocate the father and sons thereafter was not reduced to writing.

Harold Lee had served the Seagram organization for thirty-six years in positions of responsibility before he acquired the half interest in the Capitol City distributorship. From 1958 to 1962, he was chief executive officer of Calvert Distillers Company, a wholly-owned subsidiary. During this long period he enjoyed the friendship and confidence of the principals of Seagram.

In 1958, Harold Lee had purchased from Seagram its holdings of Capitol City stock in order to introduce his sons into the liquor distribution business, and also to satisfy Seagram's desire to have a strong and friendly distributor for Seagram products in Washington, D.C. Harold Lee and Yogman had known each other for 13 years.

The plaintiffs claimed a breach of the oral agreement to relocate Harold Lee's sons, alleging that Seagram had had opportunities to procure another distributorship for the Lees but had refused to do so. The Lees brought this action on January 18, 1972, fifteen months after the sale of the Capitol City distributorship to Seagram. They contended that they had performed their obligation by agreeing to the sale by Capitol City of its assets to Seagram, but that Seagram had failed to perform its obligation under the separate oral contract between the Lees and Seagram. The agreement which the trial court permitted the jury to find was "an oral agreement with defendant which provided that if they agreed to sell their interest in Capitol City, defendant in return, within a reasonable time, would provide the plaintiffs a Seagram distributorship whose price would require roughly an amount equal to the capital obtained by the plaintiffs for the sale of their interest in Capitol City, and which distributorship would be in a location acceptable to plaintiffs." No specific exception was taken to this portion of the charge. By its verdict for the plaintiffs, we must assume as Seagram notes in its brief that this is the agreement which the jury found was made before the sale of Capitol City was agreed upon. ²

Appellant urges several grounds for reversal. It contends that, as a matter of law, (1) plaintiffs' proof of the alleged oral agreement is barred by the parol evidence rule; and (2) the oral agreement is too vague and indefinite to be enforceable. Appellant also contends that plaintiffs' proof of damages is speculative and incompetent.

I

Judge Tenney, in a careful analysis of the application of the parol evidence rule, decided that the rule did not bar proof of the oral agreement. We agree.

The District Court, in its denial of the defendant's motion for summary judgment, treated the issue as whether the written agreement for the sale of assets was an "integrated" agreement not only of all the mutual agreements concerning the sale of Capitol City assets, but also of all the mutual agreements of the parties. Finding the language of the sales agreement "somewhat ambiguous," the court decided that the determination of whether the parol evidence rule applies must await the taking of evidence on the issue of whether the sales agreement was intended to be a complete and accurate integration of all of the mutual promises of the parties.

Seagram did not avail itself of this invitation. It failed to call as witnesses any of the three persons who negotiated the sales agreement on behalf of Seagram regarding the intention of the parties to integrate all mutual promises or regarding the failure of the written agreement to contain an integration clause.

Appellant contends that, as a matter of law, the oral agreement was "part and parcel" of the subject-matter of the sales contract and that failure to include it in the written contract barred proof of its existence. Mitchill v. Lath, 247 N.Y. 377, 380, 160 N.E. 646 (1928). The position of appellant, fairly stated, is that the oral agreement was either an inducing cause for the sale or was a part of the consideration for the sale, and in either case, should have been contained in the written contract. In either case, it argues that the parol evidence rule bars its admission.

Appellees maintain, on the other hand, that the oral agreement was a collateral agreement and that, since it is not contradictory of any of the terms of the sales agreement, proof of it is not barred by the parol evidence rule. Because the case comes to us after a jury verdict we must assume that there actually was an oral contract, such as the court instructed the jury it could find. The question is whether the strong policy for avoiding fraudulent claims through application of the parol evidence rule nevertheless mandates reversal on the ground that the jury should not have been permitted to hear the evidence. See Fogelson v. Rackfay Constr. Co., 300 N.Y. 334 at 337-38, 90 N.E.2d 881 (1950).

The District Court stated the cardinal issue to be whether the parties "intended" the written agreement for the sale of assets to be the complete and accurate integration of all the mutual promises of the parties. If the written contract was not a complete integration, the court held, then the parol evidence rule has no application. ³ We assume that the District Court determined intention by objective standards. See 3 Corbin on Contracts §§ 573-574. The parol evidence rule is a rule of substantive law. Fogelson v. Rackfay Constr. Co., supra; Higgs v. De Maziroff, 263 N.Y. 473, 477, 189 N.E. 555 (1934); Smith v. Bear, 237 F.2d 79, 83 (2d Cir. 1956).

The law of New York is not rigid or categorical, but is in harmony with this approach. As Judge Fuld said in Fogelson:

"Decision in each case must, of course, turn upon the type of transaction involved, the scope of the written contract and the content of the oral agreement asserted."

300 N.Y. at 338, 90 N.E.2d at 883. And the Court of Appeals wrote in Ball v. Grady, 267 N.Y. 470, 472, 196 N.E. 402, 403 (1935):

"In the end, the court must find the limits of the integration as best it may by reading the writing in the light of surrounding circumstances."

Accord, Fogelson, supra, 300 N.Y. at 338, 90 N.E.2d 881. Thus, certain oral collateral agreements, even though made contemporaneously, are not within the prohibition of the parol evidence rule "because (if) they are separate, independent, and complete contracts, although relating to the same subject. . . . (t)hey are allowed to be proved by parol, because they were made by parol, and no part thereof committed to writing." Thomas v. Scutt, 127 N.Y. 133, 140-41, 27 N.E. 961, 963 (1891).

Although there is New York authority which in general terms supports defendant's thesis that an oral contract inducing a written one or varying the consideration may be barred, see, e. g., Fogelson v. Rackfay Constr. Co., supra, 300 N.Y. at 340, 90 N.E.2d 881, the overarching question is whether, in the context of the particular setting, the oral agreement was one which the parties would ordinarily be expected to embody in the writing. Ball v. Grady, supra, 267 N.Y. at 470, 196 N.E. 402; accord, Fogelson v. Rackfay Constr. Co., supra, 300 N.Y. at 338, 90 N.E.2d 881. See Restatement on Contracts § 240. For example, integration is most easily...