Minthorne v. Seeburg Corporation

• Decision Date: 02 August 1968
• Docket Number: No. 21639.,21639.
• Citation: 397 F.2d 237
• Parties: Jean J. MINTHORNE and Melanie Minthorne, husband and wife, Appellants and Cross-Appellees, v. The SEEBURG CORPORATION, a corporation; Seeburg Distributing Company, a corporation, Appellees and Cross-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

397 F.2d 237 (1968)

Jean J. MINTHORNE and Melanie Minthorne, husband and wife, Appellants and Cross-Appellees, v. The SEEBURG CORPORATION, a corporation; Seeburg Distributing Company, a corporation, Appellees and Cross-Appellants.

No. 21639.

United States Court of Appeals Ninth Circuit.

June 21, 1968.

Rehearing Denied August 2, 1968.

Coit I. Hughes (argued), Harry A. Stewart, Jr., of Hughes & Hughes, Phoenix, Ariz., for appellants.

John P. Frank (argued), of Lewis, Roca, Beauchamp & Linton, Phoenix, Ariz., John L. Cole, of Loeb & Loeb, Los Angeles, Cal., for appellees.

Before POPE, MERRILL and CARTER, Circuit Judges.

JAMES M. CARTER, Circuit Judge.

These appeals grow out of an action by Seeburg Corporation, a corporation and Seeburg Distributing Company, a corporation, (hereafter collectively "Seeburg").¹ The defendants were Jean J. Minthorne and Melanie Minthorne, (hereafter "Minthorne"), and others not involved in this appeal. The action was on contract for indemnification. Jurisdiction was based on diversity of citizenship and a demand in excess of $10,000.00.

Minthorne counter-claimed for breach of contract. The jury verdict was against Seeburg on its claim and for Minthorne on the counter-claim in the amount of $129,371.00.

As to the counter-claim, Seeburg claims it filed a motion for a new trial as to damages only² and a motion for judgment notwithstanding the verdict, which later motion was granted by the trial court. No action was taken by the trial court on the motion for a new trial as to damages.

Seeburg moved for a new trial on various grounds as to its claim, which was denied. Both parties appealed. However, Seeburg by its brief and on the argument of this case, expressly abandoned its appeal from "a denial of either a new trial or an affirmative judgment for Seeburg" on its claim in chief.

Thus, only three questions, each concerning the counter-claim, are presented for decision. (1) On the Minthorne appeal, (a) whether the defense of "no promise" should have been pleaded affirmatively or raised at pretrial and whether Seeburg may raise the question on a post-trial motion; (b) whether the trial court erred in granting the motion for judgment notwithstanding the verdict entered on February 17, 1965, whereby the trial court set aside the jury verdict of $129,371.00 for Minthorne on the counter-claim. (2) On Seeburg's cross-appeal,³ if, and only if, the verdict is reinstated, the effect of the failure of the trial court to rule on Seeburg's motion for new trial as to damages only.

The Major Issue

The major issue in the case is whether certain provisions in the contract, on which the verdict for $129,371.00 was based constitutes only a condition precedent or an affirmative promise or both.

Background

The case arises from a commercial transaction resulting in a law suit in which various claims were, from time to time, tried. The action started in August of 1961. Because of illness, death and vacancies in the district court of Arizona, five different federal judges tried portions of the over-all case. The matter involved in the appeal grew out of a jury trial in March and April of 1964. The order granting judgment notwithstanding the verdict was entered February 17, 1965. A final judgment covering this part of the case and many other matters was entered June 9, 1966. The appeals are from this final judgment.

Prior to February of 1960, Jean J. Minthorne was the principal shareholder of Minthorne Music Co., a distributor of equipment for Seeburg Corporation in Arizona and Southern California. The equipment consisted of coin operated machines, phonographs and game equipment. Seeburg Corporation was the manufacturer. Minthorne Music Company became deeply indebted to Seeburg Corporation, and after protracted negotiations an agreement was entered into on February 17, 1960. The agreement provided that Minthorne as an individual sold his stock in the Minthorne Music Company to Seeburg Corporation, which in turn changed the name of Minthorne Music Co., to Seeburg Distributing Company.

The agreement was an intricate one, with many pages and various riders in the form of Exhibits. The result of the agreement was that Minthorne individually and as the Minthorne Music Co., went out of the business involving his distributorship in California but continued for a time to operate a distributorship in Arizona. The agreement contained many other items with which we are not concerned. The action was brought by Seeburg to enforce various commitments and warranties made by Minthorne.

This appeal concerns what was known as the "Stereo claim." Arizona Stereophonic Music Corp., (hereafter "Stereo") was the operator of certain equipment which had been purchased from the Minthorne distributorship. The contracts had been discounted with a finance company, Refrigeration Discount Company, (hereafter "ReDisCo"). There was $95,827.21 due for equipment and time service charges. On discounting the paper to ReDisCo, there had been signatures of both the Minthorne Corp., and Minthorne individually guaranteeing the accounts. The contracts had in turn been guaranteed by Seeburg. The account was delinquent and ReDisCo demanded payment of the sum of $65,000.00 from Seeburg in April of 1961. The account was later paid off by Seeburg. Nothing was paid by Minthorne.

The machines which were the subject of the contract with Stereo were repossessed and sold by Seeburg on June 30, 1961, leaving a claim by Seeburg for a deficiency of about $40,000.00. This claim for the $40,000.00 became Count II of the complaint by Seeburg against Minthorne, Stereo, and various individual guarantors. Stereo had become bankrupt. A default judgment was taken by Seeburg against Stereo and various individual guarantors.

There had been a general counterclaim filed by Minthorne to the Seeburg complaint and part of this counterclaim became the basis for the $129,000.00 jury verdict obtained by Minthorne against Seeburg.

When, after various trials of various other issues before various judges, the parties got down to the matter in which we are now concerned, there were two matters tried to the same jury before the same district judge. One was the K. D. Smith matter referred to in Ex. D. The other was the Stereo matter described above.

The Seeburg claim was that Stereo had defaulted; that Seeburg had repossessed the equipment and had sold it at an over-all loss of $40,000.00 and had therefore sought damages from Minthorne as a guarantor on his contingent liability. The jury in effect, decided that Seeburg had not followed the procedures laid out in Ex. D, and found against Seeburg on its claim for $40,000.00. All contentions of Seeburg on appeal as to this matter have been abandoned.

The essence of the Minthorne counter-claim as developed at the trial was that Minthorne was entitled to keep the equipment and operate it due to the failure of Seeburg to follow the promises set forth in Ex. D, and that Minthorne was damaged by reason of its failure to be allowed to do so.

The court submitted an instruction to the jury which in substance stated that if Seeburg was not entitled to claim indemnity on the contingent liability of $40,000.00 because it had failed to follow the contract procedures, then Minthorne was affirmatively entitled to damages for this failure by Seeburg. The instruction told the jury to assess damages. The jury found against Seeburg on its claim for $40,000.00, and returned a verdict in favor of Minthorne for $129,371.00, which was then nullified by the court's entry of judgment notwithstanding the verdict.

A. MINTHORNE'S APPEAL

1. Minthorne's contention that the defense of "no promise" was not affirmatively pleaded or raised at pretrial; that Seeburg may not raise it on a post trial motion.

It is the contention of Minthorne that the particular ground on which the judge granted the motion for judgment notwithstanding the verdict, namely that Ex. D contained only a condition precedent to recovery and no independent promise or covenant, was raised for the first time after the verdict. Seeburg answers that all along it contended that there was no cause of action stated in that part of the counter-claim which was tried to this jury. Apparently it was at the time that jury instructions were being discussed, that for the first time, Seeburg particularized its objection to the counter-claim and made the contention which is specifically set forth on this appeal, to-wit, that Ex. D contained only a condition and not a promise or a covenant.

Minthorne contends (1) that the defense of lack of covenant or promise was not affirmatively plead or raised in pretrial, and (2) that by the doctrine of estoppel or waiver, Seeburg may not raise the issue for the first time on a post trial motion. Because of our holding in this appeal, namely that there was a covenant or promise in Ex. D, we do not pass on these contentions.

2. Interpretation of the Contract

The question comes down essentially to an interpretation of the contract. Ex. D was a part of and must be considered with the entire contract, dated February 17, 1960. Cal.C.C. § 1641; Rest.Contracts § 235(c). Section 15, of the contract, provides that it be interpreted pursuant to California law.

There is much discussion in Minthorne's briefs as to whether there was a condition precedent or a promise or covenant. Witkin, California Law, § 233, p. 262, states:

"* * * but the same fact or act may be both a condition and a promise, resulting in both an excuse of counter performance and a right of action for damages. (See Rest., Contracts, para. 257; Starr v. Davis (1930) 105 C.A. 632, 288 P. 706; Schlesinger & Sons v. Kohler & Chase (1930) 103 C.A. 195, 284 P. 244.)"

In considering what the parties meant by the language in the contract, we are entitled to take into account the background, the facts underlying execution of the contract and in particular the business methods involved in...