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Macedward v. Northern Electric Co.

decided: March 19, 1979.

FOSTER A. MACEDWARD, APPELLEE,
v.
NORTHERN ELECTRIC CO., LTD., APPELLANT.



Appeal in diversity case from a judgment of the United States District Court for the District of Vermont, James S. Holden, Chief Judge, on a verdict for plaintiff for defendant's breach of an oral contract of employment. Held, judgment vacated and cause remanded for new trial.

Before Waterman and Oakes, Circuit Judges, and Wyzanski, District Judge.*fn*

Author: Oakes

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;*fn1 and Exhibit C, appellee's application for employment of December 12, 1973.*fn2

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.*fn3

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,*fn4 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.*fn5 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.*fn6 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 ยง 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 . . . .*fn7

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.*fn8

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 ...


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