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Farmer v. Arabian American Oil Co.

decided: April 6, 1960.


Author: Clark

Before CLARK, HINCKS, and WATERMAN, Circuit Judges.

CLARK, Circuit Judge.

This is an appeal from a defendant's judgment in an action for damages for breach of a contract of employment. The action was originally instituted in the New York Supreme Court and was removed to the court below, the parties being citizens of different states.

Plaintiff, a physician specializing in the practice of ophthalmology, initially contacted defendant by letter in response to an advertisement offering foreign employment. Defendant is a major oil company with extensive operations in the Middle East. Mr. A. B. Brautovich, "recruiting representative" for defendant, informed plaintiff that a position was available in Saudi Arabia, forwarded the appropriate application forms, and arranged for plaintiff's trip to New York for a personal interview. Plaintiff was interviewed by Dr. T. E. Allen, defendant's associate medical director, in charge of the company's medical affairs in the United States. Following this interview, Dr. Allen was in touch with plaintiff on several occasions in connection with pre-employment processing. Upon completion of these preliminaries Dr. Allen extended a definite offer of employment to plaintiff via telephone on April 13, 1955. Plaintiff accepted this offer and did not subsequently discuss the terms of employment with any of defendant's representatives. The formal offer of employment was confirmed by letter from the Personnel Department dated April 13, 1955. This letter did not recite the terms of employment, but dealt primarily with travel arrangements.*fn1 It is agreed that plaintiff signed and returned the post card of confirmation as therein requested.*fn2 And pursuant to these instructions plaintiff reported to defendant's New York office on May 26, the day before his scheduled departure, to complete processing. Here he was instructed by various employees of defendant to complete a number of forms. These included a group insurance form, a hospital medical plan form, and a salary allotment form, as well as other miscellaneous papers. Among these was a form which plaintiff characterizes as a "workmen's compensation agreement," but which defendant claims as the "employment agreement.*fn3

Plaintiff duly arrived in Saudi Arabia on May 30, 1955, and performed his duties at defendant's hospital until his discharge on February 5, 1956. As a consequence plaintiff instituted this action for damages for wrongful discharge. He contends that under the oral agreement of April 13 his term of employment was the duration of defendant's operation of its oil wells in Saudi Aribia.Defendant's position is that the employment was at will pursuant to the "employment agreement" of May 26. Defendant also asserts that plaintiff was an unsatisfactory employee, while plaintiff maintains that no proper cause for his discharge existed. After trial the jury was unable to reach agreement and was discharged. The court thereupon entered judgment for defendant in accordance with its motion for a directed verdict. Fed.R.Civ.P. 50(b). In his decision, D.C.S.D.N.Y., 176 F.Supp. 45, Judge Palmieri relied upon three independent grounds for the result he reached: Parol evidence was inadmissible to vary the terms of the May 26 agreement; the alleged oral agreement was void under the statute of frauds; and Dr. Allen lacked authority to offer employment for the term alleged. The parties agree that these issues are to be determined by the law of the State of New York. We shall discuss each one in turn.

The Parol Evidence Rule

The court below held that, since the contract was set forth in writing in the "employment agreement" of May 26, 1955 (note 3 supra), evidence of a prior oral agreement was inadmissible. But we do not see how this conclusion is possible in view of the well settled rule that in order for all prior negotiations to be completely embodied in a written agreement the parties must intend such integration and that evidence dehors the writing is freely admitted to determine such intent. And here the evidence seems wholly clear that the parties did not visualize the truncated document of May 26 as embodying all the agreement between the plaintiff and the company.

"When two parties have made a contract and have expressed it in a writing to which they have both assented as the complete and accurate integration of that contract, evidence, whether parol or otherwise, of antecedent understandings and negotiations will not be admitted for the purpose of varying or contradicting the writing. This is in substance what is called the 'parol evidence rule,' a rule that scarcely deserves to be called a rule of evidence of any kind, and a rule that is as truly applicable to written evidence as to parol evidence. The use of such a name for this rule has had unfortunate consequences, principally by distracting the attention from the real issues that are involved. These issues may be any one or more of the following: (1) Have the parties made a contract?(2) Is that contract void or voidable because of illegality, fraud, mistake, or any other reason? (3) Did the parties assent to a particular writing as the complete and accurate 'integration' of that contract?

"In determining these issues, or any one of them, there is no 'parol evidence rule' to be applied. On these issues, no relevant evidence, whether parol or otherwise, is excluded. * * * No one of these issues can be determined by mere inspection of the written document." 3 Corbin on Contracts § 573 (1951), and see § 582 collecting cases of "Evidence That the Writing Was Not Assented to as a Complete and Accurate Integration"; 9 Wigmore, Evidence §§ 2425, 2429 (3d Ed. 1940); 1 Restatement, Contracts § 228 (1932); United States Navigation Co. v. Black Diamond Lines, 2 Cir., 124 F.2d 508, 510, certiorari denied Black Diamond Lines v. United States Navigation Co., 315 U.S. 816, 62 S. Ct. 805, 86 L. Ed. 1214; Caputo v. Continental Const. Corp., Mass., Dec. 7, 1959, 162 N.E.2d 813, 816; Lawrence v. Tandy & Allen, Inc., 14 N.J. 1, 100 A.2d 891; Jarvis v. Cunliffe, 140 Conn. 297, 99 A.2d 126; Rinaudo v. Bloom, 209 Md. 1, 120 A.2d 184. The New York law is in accord. Chapin v. Dobson, 78 N.Y. 74, 79; Beattie v. New York & L. I. Const. Co., 196 N.Y. 346, 349, 89 N.E. 831; Dickinson v. Dickinson, 273 App.Div. 1055, 79 N.Y.S.2d 833. A closely analogous case is Leifer v. Scheinman, 179 App.Div. 665, 167 N.Y.S. 105, where the writing dealt with the salary to be paid plaintiff, but not with his duties or the term of employment; in a suit for wrongful discharge he was allowed to show that the hiring was for a year.*fn4 This case has recently been quoted with approval by the New York Court of Appeals, Laskey v. Rubel Corp., 303 N.Y. 69, 72, 100 N.E.2d 140.

In the present case there is nothing to show that the parties intended an integration of their negotiations in the printed form of May 26, 1955; in fact, the contrary is strongly indicated. The recital of facts above showing a whole series of telephonic, written, and oral negotiations, with several statements of confirmed offer duly accepted, contains nothing to suggest an intent eventually to integrate the acceptances into some formal document. Quite obviously the parties proceeded on the basis that no writing was needed to complete the agreement. So a contract was made as early as the letter of April 13. The later document of May 26 is quite lacking in any normal terms of employment, including place and time and duration of employment, manner and time of payment, nature of occupation, and the like. And the plaintiff's testimony - which is not challenged on this issue - is that he was informed by an employee of defendant that it was merely a routine form involving workmen's compensation rights. The nature of the form suggests this conclusion. We think it therefore beyond dispute that there was no integration of the agreement so as to prevent resort to parol evidence of its terms.*fn5

The Statute of Frauds

Whether an oral agreement for the duration of defendant's oil operations in Saudi Arabia is void under the statute of frauds, N.Y.Pers.Prop.Law § 31, poses a more troublesome question in view of the New York cases. Initially it would appear that, since the expressed contingency might occur within a year, the agreement is capable of performance within this period and thus does not fall within the statute. See 2 Corbin on Contracts § 446 (1950). And this is true even on the plaintiff's testimony that he felt himself obligated to remain in defendant's employ for a reasonable period of time, perhaps five years. But several recent decisions of the New York Court of Appeals have created some uncertainty in respect to this principle. This uncertainty is reflected in the fact that the judgment appealed from is contrary to an earlier decision by Judge Weinfeld denying defendant's second pretrial motion for summary judgment based on its claim as to the statute of frauds.

Defendant relies, as did the court below, upon Zupan v. Blumberg, 2 N.Y.2d 547, 161 N.Y.S.2d 428, 141 N.Ed.2d 819; Martocci v. Greater New York Brewery, 301 N.Y. 57, 62-63, 92 N.E.2d 887, 889; and Cohen v. Bartgis Bros. Co., 264 App.Div. 260, 35 N.Y.S.2d 206, affirmed without opinion 289 N.Y. 846, 47 N.E.2d 443. See also Droste v. Harry Atlas Sons, 2 Cir., 145 F.2d 899, rehearing denied 2 Cir., 147 F.2d 675, certiorari dismissed 325 U.S. 891, 65 S. Ct. 1408, 89 L. Ed. 2003. Each of these cases involved an agreement to pay commissions on all future orders received from customers initially solicited by the agent. Thus the contractual relationship between the parties was by its terms permanent, even though the principal's liability was contingent upon the receipt of such future orders. Martocci v. Greater New York Brewery, supra, 301 N.Y. 57, 92 N.E.2d 887.*fn6 By contrast, the contractual relationship herein involved did not extend beyond the defendant's operations in Saudi Arabia when, according to the plaintiff's testimony, the contract was to terminate.

It is urged, however, that in each of the above cited cases the relationship would be terminated by the dissolution of the principal's businesses reply to a similar argument the New York Court of Appeals noted that such termination would constitute destruction of the contract, rather than performance, since the agreement contained "no provision authorizing either or both of the parties to terminate as a matter of right." Zupan v. Blumberg, supra, 2 N.Y.2d at page 550, 161 N.Y.S.2d at page 429, 141 N.E.2d at page 820, citing the leading case of Blake v. Voigt, 134 N.Y. 69, 31 N.E. 256. Since plaintiff herein testified that defendant's obligation was expressly limited to the duration of its oil operations in Saudi Arabia, we find Blake v. Voigt controlling, so that the alleged oral agreement falls without the statute. See Krawitz v. Gross, Sup., 156 N.Y.S.2d 576; Platt v. Whitelawn Dairies, Inc., 3 Misc.2d 19, 150 N.Y.S.2d 391, affirmed 2 A.D.2d 683, 153 ...

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