Foster A. MacEdward v. Northern Electric Co., Ltd.

595 F.2d 105, 1979 U.S. App. LEXIS 16138

• Court: Court of Appeals for the Second Circuit
• Decided: March 19, 1979
• Docket: 728, Docket 77-7514
• Status: Published

Opinions

OAKES, Circuit Judge:

Appellant, Northern Electric Co., Ltd., appeals from a judgment in this diversity action for appellee, Foster A. MacEdward, after a jury trial in the United States District Court for the District of Vermont before James S. Holden, Chief Judge. The jury awarded appellee damages of $34,600 as due on a contract of employment. We vacate the judgment below and remand the case for a new trial.

Appellee, MacEdward, left his job as a pilot with Air North, Inc., in Burlington, Vermont, to accept a position as Flight Director with appellant in Montreal, Quebec. Appellee began work with Northern Electric in early December 1973 pursuant to a written offer of employment of October 31, 1973. Appellee resigned from his position with Northern Electric on July 15, 1974, at the latter's request because of his alleged violations of Canadian aviation regulations. Appellee received his salary through September 15, 1974.

Suit was based on an alleged promise, not contained in the written offer of employment, of a minimum two-year contract of employment. The employer’s answer raised as affirmative defenses, among others, the defenses that the Statute of Frauds barred recovery because the contract was not to be performed within one year; that appellee’s employment was in any event terminable at will; or, in the alternative, that if the employment was for a fixed term, appellant had properly exercised its right to terminate the employment.

At trial, MacEdward’s counsel attempted to elicit from his client testimony as to the oral representations upon which his suit was partially based. Objection was made on the ground that the contract “falls within the Vermont Statute of Frauds and cannot be shown unless it is in writing.” Appellee’s counsel urged that the oral contract was taken out of the Statute of Frauds first, by the doctrine of promissory estoppel based on MacEdward’s change of position to his detriment, and second, because “a substantial portion of this [contract] would not fall within the Statute of Frauds [because it] could have occurred within the one-year period.” The trial judge indicated that he would allow the testimony as “background material.” MacEdward’s counsel then stated further that it was his client’s position that the letter (of October 31, presumably) did not constitute the whole contract. The “major substance” of the contract, counsel argued, “took place between Mr. Lobb [appellant’s president] and Mr. MacEdward.” The court thereupon allowed appellee’s testimony as to the oral representations of John C. Lobb that Lobb would “take care of” a contract of employment for appellee for “two, three, or five years or at least a gentleman’s agreement.” Three relevant written exhibits were admitted: Exhibit A, the offer of employment of October 31, 1973; Exhibit B, dealing with payment of relocation expenses;¹ and Exhibit C, appellee’s application for employment of December 12, 1973.²

Neither party submitted requests to charge to the trial judge; instead, the court charged the jury on instructions without counsels’ input and guidance. Pertinent portions of the charge to the jury on the contract generally are set forth in the margin.³

Northern Electric objected to the instructions (1) that it was not essential for a contract to be in writing, in one instrument, or signed by both parties; (2) that oral promises could be enforced if the jury found that the parties did not intend the promises to be in writing (counsel reminding the court of Northern Electric’s position that any contract to be performed in excess of one year must be in writing); and (3) that characterized one party’s leading another to believe a certain set of circumstances and the second party’s reliance on the representations as the equivalent of a meeting of the minds. The trial judge answered the third objection (as to the characterization) by stating that his charge was a statement of the law in Vermont,⁴ but he did not comment on the first two objections or supplement the original charge to the jury after the bench conference was concluded. The case thus went to the jury with no instructions on the defense of the Statute of Frauds or on the law of promissory estoppel.

Appellant’s post-verdict motions were alternatively based on a lack of evidence to show an oral promise, the Statute of Frauds, portions of the charge claimed to be erroneous, and the verdict as being against the weight of the evidence. The trial court held, however, evidently as a matter of law, that there was sufficient evidence of an oral promise of employment for two, three, or five years and that the plaintiff’s reliance on the promise constituted sufficient detriment to remove the bar of the Statute of Frauds. See note 4 supra. The court further held that its instructions were correct and that the evidence supported the jury’s verdict.

Our first problem in reviewing the record on appeal is that we cannot say whether the jury correctly found, as it impliedly did by its verdict for the plaintiff, that appellant’s president Lobb’s oral promise to appellee of a contract for at least two years superseded the provision in Exhibit C, supra note 2, that the employment was terminable on not more than one month’s notice. Part of the difficulty in ascertaining the meaning of the jury’s verdict results from the jury instruction that subsequent dealings between the parties could “wash[] out any prior negotiations” and that the jury should consider Exhibit C, plaintiff’s application for employment, and Exhibit A, defendant’s response to that application, as evidence of what the parties intended. The instruction was correct as a matter of law but, unfortunately, not as a matter of fact. Exhibit A is the offer of employment of October 31, 1973; Exhibit C, the application of December 12, 1973. Thus Exhibit A was not a response to the application as characterized below. The trial judge properly gave the jury the latitude to consider the effect on prior agreements of the subsequent dealings between the parties; but because this instruction confused what was prior with what was subsequent, we cannot tell which the jury found to have been superseded, that is, whether, by its verdict, the jury intended to give effect to the discussions or to the clause in Exhibit C that purported to make the employment terminable on one month’s notice.

This ambiguity becomes crucial because the evidence left hanging unanswered whether the discussions between appellee and Lobb about the term of the contract continued after the December 12 application for employment, Exhibit C. Appellee clearly testified that discussions about obtaining a reciprocal pilot’s license (according to the testimony, the other condition upon which MacEdward insisted) continued for five and a half months, but specificity about the timing of the contract negotiations is noticeably absent. Appellee did testify that subsequent to receiving the October 31 offer of employment, he was “continually talking with Mr. Lobb,” but the testimony does not further indicate that the discussions were subsequent to the December 12 application also or to what they particularly referred. At the very moment when appellee’s counsel could have clarified the record, appellant’s counsel objected to the form of the question; and in the end appellee’s counsel did not ask or receive an answer to the question whether appellee talked to Lobb about the contract after the December 12 application. Thus, although the time frame is clearly “after October 31st,” we are left to speculate whether it was after December 12 also. Upon an independent examination of the record, we are unwilling to hold as a matter of law that the contract negotiations superseded the clause in Exhibit C.

There is another, perhaps more serious, problem in reviewing this case. Appellant’s answer raised the Statute of Frauds as an affirmative defense to the alleged oral promise for a contract of at least two years. Appellant’s counsel objected on this same ground at the beginning of appellee’s testimony about the discussions with Lobb and at other times in the trial as well as in the post-verdict motions. Appellee based his rebuttal at the time of the objection at trial on promissory estoppel, and the court indicated that it would allow the testimony as “background material.” The trial judge did not specifically address the issues of the Statute of Frauds and estoppel again until his memorandum and order denying appellee’s post-trial motions in which he appears to hold as a matter of law that appellee’s reliance to his detriment on appellant’s alleged promise of a contract for at least two years constituted a sufficient detriment to remove the bar of the Statute of Frauds.⁵ We can assume that the court’s denial of the motions for directed verdict represents implied findings that appellee had introduced sufficient evidence of reliance to raise a jury question about promissory estoppel.⁶ But more than this we cannot assume. Because the court’s instructions do not cover these key issues we cannot conclude that the verdict was properly rendered, even though no specific objection was made to the failure to charge on them.

A plaintiff who seeks to raise promissory estoppel in avoidance of the Statute of Frauds must prove sufficient reliance and detriment. The Restatement (Second) of Contracts § 217A(2) indicates five factors in the determination of whether in the interest of justice a defendant should be held to an oral promise notwithstanding the Statute of Frauds, two of which are particularly relevant here:

(b) the definite and substantial character of the action or forbearance in relation to the remedy sought; [and]

(c) the extent to which the action or forbearance corroborates evidence of the making and terms of the promise, or the making and terms are otherwise established by clear and convincing evidence

⁷

The court’s charge to the jury on “representations” and “reliance,” however, seems to reflect the doctrine of contract formation more than promissory estoppel. The instruction omits adequately to present the issues of “definite and substantial” reliance and proof of the terms of the promise by “clear and convincing evidence.” Indeed, the charge did not assign to the plaintiff the burden of proof of reliance and detriment. Thus the jury’s verdict cannot be clearly ascertained.⁸

Accordingly, we vacate the judgment below and remand the case for a new trial. We recognize that neither party complained on appeal of the charge to the jury; and in the ordinary course of appellate review we might not reach the issue. But an appellate court has the power to notice fundamental errors at trial even if the parties do not raise them on appeal. See, e. g., McDougall v. Dunn, 468 F.2d 468, 476 (4th Cir. 1972); Atlantic Coast Line Railroad Co. v. Kammerer, 205 F.2d 525, 526 (5th Cir. 1953) (dicta); Keeshin Motor Express Co. v. Glassman, 219 Ind. 538, 38 N.E.2d 847, 854-55 (1942); Johnson v. Parsons, 153 Me. 103, 135 A.2d 273, 277 (1957); Schmitt v. City of Philadelphia, 248 Pa. 124, 93 A. 879 (1915). See also San Antonio v. Timko, 368 F.2d 983 (2d Cir. 1966) (Friendly, J.) (weakness of the evidence is important to characterization of error as “fundamental error” and propriety of reversal of judgment below), in which it does not appear whether appellant raised on appeal the ground upon which the court of appeals reversed the judgment below. The standard is reversal for “fundamental error”; and it is “fundamental” that the charge cover the basic elements of an asserted claim or defense when, as here, the facts are in dispute. Frederic P. Wiedersum Associates v. National Homes Construction Corp., 540 F.2d 62, 66 (2d Cir. 1976). Accord, Choy v. Bouchelle, 436 F.2d 319, 325 (3d Cir. 1970) (charge of court reviewed as plain error omitting to provide legal guidelines to the relevant factual situations).

So too a case may be remanded where an inadequate record prevents the appellate court from conducting an intelligent review. See, e. g., Jelfo v. Hickok Manufacturing Co., 531 F.2d 680, 681 (2d Cir. 1976); McCune v. Frank, 521 F.2d 1152 (2d Cir. 1975). See also Coopers & Lybrand v. Live-say, 437 U.S. 463, 98 S.Ct. 2454, 2461, 57 L.Ed.2d 351 (1978). Finally, we note that where the record contains no direct evidence on a determinative issue, it is possible that “on [that] record, neither party is entitled to prevail. If the issue . . . [is] determinative, a new trial should have been ordered so that this issue might have been resolved in the light of a full examination of the witness who could have given further testimony on the subject.” Stewart v. Southern Railway Co., 315 U.S. 283, 286, 62 S.Ct. 616, 617, 86 L.Ed. 849 (1942). Where, as in this case, “[t]he jury may not only have been deprived of the best evidence, but it may have been confused by what was introduced[,] [t]here is, therefore, a substantial question as to whether there has been a ‘just determination of [this] action.’ Fed.R. Civ.P. 1. Under these circumstances a new trial is appropriate.” Samuels v. Health & Hospitals Corp., 591 F.2d 195, 199 (2d Cir. 1979).

Judgment reversed and cause remanded for a new trial.

1 . Exhibit B, which explicitly related only to appellant’s payment of appellee’s moving expenses, contained the following clause: “If the termination of your employment is initiated by the Company, no repayment of this amount will be required and the Company will not be responsible for any claims or damages resulting from such termination.’’ Although the italicized language might be read to suggest an employment relationship terminable at will, we do not thus read it. We limit the disclaimer of liability only to claims for moving expenses because that is the context of the letter. If the clause were ambiguous, we would construe it against appellant which prepared the form. At a minimum, we would find that there was no mutual assent that the clause, buried in a letter about moving expenses, would create an employment contract terminable at will. Finally, as we discuss infra in text, there was testimony that discussions about a contract for a minimum term continued after October 31, 1973, the date of Exhibit B, and thus would have modified appellant’s right to terminate at will appellee’s employment. Indeed, even Exhibit C, infra note 2, would have superseded this arrangement by requiring one month’s notice to terminate. Northern Electric did in fact pay appellee an extra two months’ salary.

2 . Exhibit C provided:

It is understood and agreed that in the event of employment the length of notice to be given on either side to terminate the engagement shall be one hour, one day, one week, or one month, from the date of such notice, according as the rate of pay at the time of notice may be by the hour, day, week or month, as shown by the employee’s rate card irrespective of any original rate. It is further understood and agreed that the length of notice required shall not be affected by the fact that the Company, as a matter of convenience, may at its option pay the employee’s wages by the week or by some other period that may not correspond to the period of engagement, and in any case, neither party shall be required or obliged to give notice in excess of one month.

There was no evidence as to the rate of pay on appellee’s rate card, so appellant would be bound to provide the maximum notice of one month. Appellant in fact paid appellee’s salary for two months after requesting his resignation.

3 . [I]t’s not essential that a contract .

be embodied in one written instrument, nor is it required that a binding contract . be signed by both parties or their authorized representatives.

[I]n many cases a written contract will not define all aspects of the agreement, even though the parties have considered particular items not discussed in the written documents and have actually reached some kind of an agreement not on written terms as well.

If you believe from the evidence that the agreement between the parties here was not intended to be contained only in an instrument signed by them, but rather consisted of both written and oral promises, then the oral portions of the agreement may be enforced and damages awarded for breach thereof just as though those portions had been contained and appeared in the written expression of the agreement as exhibited by the parties.

I caution you that a complete contract can only result where there is a meeting of the minds of the parties on each term. Whether that be in writing or oral. That is, the parties must agree to the same things at the same time.

If a provision of a contract is ambiguous, does not clearly define the rights of the parties, the law allows you to consider the circumstances surrounding the agreement at the time it was made and antecedent to that time in order to determine whether at the time of the agreement the parties had some mutual understanding which is not set forth precisely in the writings themselves and if one party to a contract leads the other to believe that a particular item is part of the agreement and that person should realize that the other party would reasonably have believed this to be the case, then this action on the part of the person who makes such a representation is the equivalent of a meeting of the minds, even if the parties did not actually and specifically share in this particular understanding.

The question is what the parties intended.

To determine what the parties intended, you may consider the background of their undertaking. What facts and circumstances brought the two people together? What circumstances prevailed at the outset of their negotiations? What they said and what they wrote and what they did with reference to reaching a final agreement. As to this, of course, you may include Defendant’s Exhibit “C”, which was the plaintiffs application for employment. You may also consider the defendant’s response to that application as is set forth in the Defendant’s Exhibit “A”, which was the Beauchamp letter of October 31st, 1973, and you may also consider the second letter of the same date that is set forth in Defendant’s Exhibit “B”.

The court further charged that if the jury found, as MacEdward contended, that Mr. Lobb agreed to give him a two, three, or five year contract but Northern Electric failed to specify the term, then the jury should hold the employer to the least favorable term of two years. The court charged Northern Electric’s position of a contract terminable at will in reliance on Exhibit A and that if the jury found that the term of employment was indefinite when the plaintiff began work, the jury should consider “whether [sic] . . . the subsequent letter did not include actual length of the time of employment. You may consider whether this washed out any prior negotiations that might have been had regarding the length of time that the contract was to remain in force.”

4 . It is difficult to tell whether the characterization referred to promissory estoppel or to the objective theory of contractual intent. If the latter, the court was clearly correct. If the former, the Vermont Supreme Court does view promissory estoppel favorably. See Overlook v. Central Vermont Pub. Serv. Corp., 126 Vt. 549, 237 A.2d 356 (1967). To be sure, no case has specifically followed Restatement (Second) of Contracts § 217A (Tent. Draft Nos. 1-7, 1973), see Comment b and Illustration 2, permitting avoidance of the Statute of Frauds through promissory reliance, but we have no reason to doubt that the Vermont Supreme Court would be likely to follow the Restatement; the Law Institute has always carried great weight with that great court.

5 . MacEdward v. Northern Electric Co., No. 75 Civ. 137 (D.Vt. Sept. 21, 1977).

6 . See note 4 supra.

7 . The other three factors that the Restatement suggests are:

(a) the availability and adequacy of other remedies, particularly cancellation and restitution;

(d) the reasonableness of the action or forbearance;

(e) the extent to which the action or forbearance was foreseeable by the promisor.

8 . Nor can we hold as a matter of law that appellee’s proof of reliance was insufficient to permit the case to go to the jury. There was evidence that he left a long-continued employment, took certain refresher training to continue his qualification to fly the Northern Electric plane, and incurred certain housing and traveling expense tending to offset the better pay received than in his former employment.