Rosemann v. Roto-Die, Inc., 03-2158.

• Decision Date: 29 July 2004
• Docket Number: No. 03-2158.,03-2158.
• Parties: Phillip L. ROSEMANN, Plaintiff — Appellant, v. ROTO-DIE, INC., Defendant — Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

377 F.3d 897

Phillip L. ROSEMANN, Plaintiff — Appellant, v. ROTO-DIE, INC., Defendant — Appellee.

No. 03-2158.

United States Court of Appeals, Eighth Circuit.

Submitted: February 11, 2004.

Filed: July 29, 2004.

COPYRIGHT MATERIAL OMITTED

Appeal from the District Court, Webber, J.

John S. Sandberg, argued, St. Louis, MO (Jeffrey L. Dunn and Timothy C. Sansone, on the brief), for appellant.

James D. Bass, argued, St. Louis, MO, for appellee.

Before LOKEN, Chief Judge, BOWMAN and WOLLMAN, Circuit Judges.

LOKEN, Chief Judge.

Philip Rosemann is a minority shareholder in Roto-Die, Inc., a closely held corporation. Rosemann and other family members entered into a Stock Redemption Agreement in 1978, when Rosemann received his initial Roto-Die shares by gift from his father. When a dispute arose concerning the redemption price under that Agreement, Rosemann commenced this diversity action, alleging that he tendered twenty shares of stock and Roto-Die "breached the Stock Redemption Agreement by failing and refusing to redeem the twenty (20) shares ... at present fair market value."

The Agreement provides that, if Rosemann notifies Roto-Die of his desire "to sell any or all of his shares of stock ... then the Company shall purchase all of said shares of the selling shareholder at the price above set forth." The only provision that arguably contains a "price above set forth" appears in a different paragraph of the Agreement and states: "The value of each share of stock of the Company held by each Stockholder shall be $9.75, which is the fair market value at the date of this agreement." The district court granted summary judgment in favor of Roto-Die, concluding that Roto-Die properly refused Rosemann's conditional tender of the twenty shares because the Agreement unambiguously calls for a sale price of $9.75 per share. We remanded for further proceedings, concluding that the redemption price term is ambiguous and extrinsic evidence is needed to determine the intent of the contracting parties. Rosemann v. Roto-Die, Inc., 276 F.3d 393, 398-401 (8th Cir.2002).¹ On remand, the case was tried to a jury which returned a verdict in favor of Roto-Die. Rosemann again appeals, arguing the district court² erred in instructing the jury and in four evidentiary rulings. We affirm.

I. The Jury Instructions.

The district court based its verdict directing instruction on Missouri Approved Instruction 26.06, which applies when the "terms and breach" of a contract are at issue. This was clearly the correct approach. "In any case where an issue of ambiguity exists, the terms of the contract are in dispute; and MAI 26.06 must be the starting point for the instruction of the jury." Busch & Latta Painting Corp. v. State Highway Comm'n, 597 S.W.2d 189, 200 (Mo.App.1980); see James O'Brien & Assocs., Inc. v. Am. Sportsman Travel, Inc., 819 S.W.2d 62, 64 (Mo.App.1991). Consistent with the MAI 26.06 format, the district court instructed:

Your verdict must be for [Rosemann] if you believe:

First, [Rosemann] and [Roto-Die] entered into an agreement whereby [Roto-Die] would pay [Rosemann] ... current fair market value of [Roto-Die]'s stock upon request of [Rosemann] that [Roto-Die] purchase any or all of [Rosemann]'s stock; and

Second, [Rosemann] performed his agreement; and

Third, [Roto-Die] failed to perform its agreement; and

Fourth, [Rosemann] was thereby damaged.

On appeal, Rosemann first argues that the district court violated the law of the case doctrine by refusing to instruct the jury that the price term in the Agreement was ambiguous when our prior opinion so held. This contention is without merit. Our prior opinion reversed the grant of summary judgment and remanded for further proceedings. We did not address the question of jury instructions; indeed, we did not direct that the issue be submitted to a jury. See Busch & Latta, 597 S.W.2d at 198 ("the mere fact of ambiguity does not automatically require intervention of a jury").

Rosemann next argues that the failure to give an explicit ambiguity instruction misled the jurors into believing "they could find in favor of Rosemann only if the Agreement is definitive concerning the price term." This was unfairly prejudicial, Rosemann explains, because to prevail he did not have to convince a jury "that the Agreement has an unambiguous price term — fair market value." Like the district court, we disagree. Rosemann's complaint alleged that Roto-Die breached the Agreement by refusing to redeem the tendered twenty shares "at present fair market value." Prior to trial, in an order not challenged on appeal, the district court ruled, in accordance with the complaint, that Rosemann "is precluded from seeking any valuation for his shares except fair market value." Under Missouri law, when the parties urge conflicting interpretations of an ambiguous term, "[t]he verdict directing instruction must hypothesize the proponent's version of the agreement." Graham v. Goodman, 850 S.W.2d 351, 354 (Mo. banc 1993). Thus, when the district court instructed the jury that Rosemann must prove that Roto-Die agreed to purchase his stock for fair market value, the instruction fairly presented the case to the jury, correctly stated the governing law, and gave Rosemann ample opportunity to urge the jury to find that the parties to the Agreement agreed upon fair market value as the redemption price. See H.H. Robertson v. V.S. DiCarlo Gen. Contractors, Inc., 950 F.2d 572, 576 (8th Cir.1991) (standard of review).

II. The Challenged Evidentiary Rulings.

A. A Parol Evidence Rule Issue. Rosemann argues that the district court misapplied the Missouri parol evidence rule in limiting the testimony of Rosemann's brother Michael. In 1988, Roto-Die purchased Michael's five thousand shares of stock for $850,000 ($170 per share) under a Redemption Agreement expressly providing that it "contains the entire understanding of the parties hereto." The parties to the agreement included Rosemann, who signed as a "Non-selling Shareholder" and was an "Obligor" under a portion of the agreement that gave Michael the possibility of an additional payment if Roto-Die was sold to a third party within the following ten years. At trial, Rosemann offered evidence intended to show that Michael in fact received $3,000,000 rather than $850,000 for his stock. The district court excluded that evidence as contrary to the parol evidence rule. As the parol evidence rule is a rule of substantive law, we apply Missouri law in resolving this issue. See Union Elec. Co. v. Fundways, Ltd., 886 S.W.2d 169, 170 (Mo.App.1994); Bellows v. Porter, 201 F.2d 429, 432 (8th Cir.1953).

Under Missouri law, "Extrinsic evidence of a prior or contemporaneous agreement is generally not admissible to vary, add to, or contradict the terms of an unambiguous and complete written document." Union Elec., 886 S.W.2d at 170. The district court properly excluded Michael's handwritten notes and testimony relating to proposals and negotiations leading up to the signing of the Redemption Agreement. These prior dealings were superseded by or merged into the integrated agreement. Rosemann also offered evidence relating to separate employment and leasing arrangements between Michael and Roto-Die. As the district court recognized, this evidence raised a closer question because the parol evidence rule does not bar evidence of "a wholly separate and independent contract that did not inherently conflict with the written [integrated] agreement." C.L. Maddox, Inc. v. Benham Group, Inc., 88 F.3d 592, 599 (8th Cir.1996). Here, Rosemann sought to use the separate agreements to show that Michael received more for his shares than the $850,000 specified in the Redemption Agreement. That was in inherent conflict with the integrated writing. Moreover, establishing whether the separate transactions were related to the Redemption Agreement and, if...