Opinion
Editorial Note:
This opinion appears in the Federal reporter in a table titled "Table of Decisions Without Reported Opinions". (See FI CTA9 Rule 36-3 regarding use of unpublished opinions)
Argued and Submitted Aug. 7, 1986.
C.D.Cal.
AFFIRMED IN PART AND REVERSED IN PART.
Appeal from the United States District Court for the Central District of California; David W. Williams, District Judge, Presiding.
Before TANG and BRUNETTI, Circuit Judges, and WILLIAM J. JAMESON , District Judge.
Honorable William J. Jameson, Senior United States District Judge for the District of Montana, sitting by designation.
MEMORANDUM
Eastern Airlines, Inc. (Eastern) appeals a jury verdict awarding compensatory and punitive damages to Aerotron Aircraft Radio, Inc. (Aerotron). Eastern argues that the district court erred by admitting evidence in violation of the parol evidence rule, by submitting improper jury instructions, and by permitting certain unsupported claims to go to the jury. Eastern also contests the award of prejudgment interest. We affirm the award of compensatory and punitive damages and reverse the award of prejudgment interest.
FACTUAL BACKGROUND
In March 1982, World Jet-Aircraft Industries (World Jet) contracted with Eastern to buy a used Boeing 727 aircraft. World Jet also entered into a contract with Aerotron Aircraft Radio, Inc. (Aerotron) to convert the plane into an executive jet for resale to the Liberian government.
On June 8, 1982, representatives of each company met and agreed that, even though World Jet had not yet paid Eastern for the plane, Eastern would deliver the plane to Aerotron so that Aerotron could begin the necessary modifications. A letter agreement, executed that day, provided that Eastern would retain title to the aircraft and that no liens would be placed on the plane until Eastern was paid in full by World Jet. Aerotron and World Jet then separately agreed to an installment payment schedule for the work Aerotron was to perform. World Jet executed a promissory note in favor of Eastern for the purchase price of the plane and Eastern delivered the plane to Aerotron in August 1982.
By November 1, 1982, Aerotron's work was substantially complete. World Jet had paid for only a portion of the work, however, and almost $380,000 remained owing to Aerotron. Eastern had not been paid anything on the promissory note. World Jet attempted to schedule a "closing" on November 1, 1982, at which time Liberia was to pay for the plane, enabling World Jet to pay both Aerotron and Eastern. Liberia refused to close and instead presented a list of requirements prior to concluding the transaction, including some additional modifications to the plane to be performed by Eastern. Aerotron then agreed to transfer possession of the aircraft back to Eastern subject to certain assurances about how Aerotron would be paid the money it was still owed. The nature of these assurances is the focus of the dispute between the parties to this appeal.
It is undisputed that Eastern offered to receive funds directly from Liberia and to disburse them to itself, Aerotron, and World Jet, in that order, in exchange for Aerotron's release of the plane. Paul Finley, Aerotron's representative at the closing, contacted Ronald Cannady, Aerotron's president, to obtain authority for such an agreement. Finley and George Dutton, Eastern's representative, conferred with Cannady by speaker phone. Although the testimony concerning this conversation varies slightly, Dutton apparently agreed that Eastern would obtain an irrevocable letter of credit from Liberia. Cannady testified further that it was agreed that Aerotron would only release the plane if the letter of credit contained sufficient funds for Aerotron and that Eastern would only release the plane to the Liberians if Aerotron were paid.
Eastern prepared a letter agreement that same day and it was signed by Finley on behalf of Aerotron. The letter states that Eastern agrees to "accept funds" from Liberia and to disburse them. The writing does not mention the letter of credit or the additional assurances Aerotron claims Eastern provided.
The letter agreement reads as follows:
Cannady also testified that on November 3, 1982, he had a further conversation with Dutton, confirming Cannady's understanding that their agreement was dependent on a letter of credit with sufficient funds to pay Aerotron. On November 8 and 9, 1982, Aerotron and Eastern exchanged telex messages, confirming that a letter of credit was being arranged and that Eastern would allow the plane to leave Miami only if the letter of credit was acceptable to Eastern. On November 10, Aerotron released the plane to Eastern.
On November 26, World Jet representatives appeared at Eastern's offices with a document assigning funds to Eastern from a letter of credit obtained by Liberia, payable to World Jet. The plane left for Liberia within 24 hours. The funds assigned to Eastern were sufficient to pay Eastern but left Aerotron with a balance owing of $316,362.42.
Aerotron sued World Jet and Eastern for the balance, based on theories of breach of contract, promissory estoppel, negligent misrepresentation, fraud, and conspiracy. The district court granted a directed verdict in favor of Aerotron and against World Jet on the condition that Aerotron dismiss its fraud claim and its prayer for punitive damages against World Jet. Aerotron's claims against Eastern went to the jury, which found Eastern liable on a general verdict for $316,362,42 plus interest and awarded $150,000 in punitive damages. Eastern moved for judgment notwithstanding the verdict and for a new trial. Those motions were denied, and this appeal followed.
STANDARD OF REVIEW
A district court's determination that sufficient evidence exists to justify submitting certain claims to the jury will be upheld unless the court finds that "there can be but one conclusion as to the verdict that reasonable men could have reached." Walker v. KFC Corp., 728 F.2d 1215, 1223 (9th Cir.1984). The prevailing party must be given the benefit of every reasonable inference the evidence may justify. Id. at 1217. "Neither the district court nor this court may weigh the evidence or order a result it finds more reasonable if substantial evidence supports the jury verdict. Mosenian v. Peat Marwick, Mitchell & Co., 727 F.2d 873, 877 (9th Cir.1984). Principles of contract interpretation are reviewed de novo. Interpetrol Bermuda Ltd. v. Kaiser Aluminum, 719 F.2d 992, 998 (9th Cir.1983).
ANALYSIS
I. Breach of Contract and Parol Evidence
The parties present two versions of the contract in question. Eastern argues that the November 1, 1982 letter agreement is an integrated contract. If this is correct, Eastern did not breach the contract by releasing the plane without obtaining sufficient funds from the Liberians to pay Aerotron. Aerotron contends that the contract actually consisted of a series of communications including the November 1 letter, oral promises made by Eastern, and the exchange of telex messages on November 8 and 9.
Eastern claims that the district court violated the parol evidence rule by admitting Cannady's testimony regarding the substance of his telephone conversations with Dutton and the telex messages. Eastern further contends that the district court erred by instructing the jury that if they found the parties did not intend the November 1 letter to be their complete contract, the jury could consider the evidence of the oral promises. Eastern's claims lack merit.
Under California law, which the parties agree applies to this dispute, a written contract presumptively supersedes all prior and contemporaneous oral agreements concerning the same subject matter as the written contract. Sullivan v. Massachusetts Mutual Life Ins. Co., 611 F.2d 261, 264 (9th Cir.1979). Parol evidence is admissible (1) to show the complete agreement between the parties if the writing is not integrated, or (2) to prove a meaning of which the writing is reasonably susceptible, even though the writing appears unambiguous on its face. Brawthen v. H & R Block, Inc., 28 Cal.App.3d 131, 136-37, 104 Cal.Rptr. 486, 490 (1972). The district court made no ruling on integration but found that the November 1 letter was ambiguous and admitted the extrinsic evidence to clarify the intent of the letter.
Under California law, a "preliminary consideration of all credible evidence offered to prove the intention of the parties" should be made by the court so that the court may determine whether the contract is reasonably susceptible of two different meanings. Pacific Gas & Electric Co. v. G.W. Thomas Drayage Co., 69 Cal.2d 33, 39-40, 69 Cal.Rptr. 561 (1968). Here Aerotron argues that, considering all of the surrounding circumstances, the November 1 letter set forth an agreement by Eastern to take responsibility for assuring Aerotron's payment if Eastern received funds from the Liberians. We agree with the district court that the November 1 letter is fairly susceptible to this understanding. The letter states that Eastern "will accept funds" from Liberia in payment for the plane. The letter does not describe these funds, although payment to Aerotron is subject to the funds being sufficient to pay both Eastern and Aerotron. The extrinsic evidence explains an inherent ambiguity in the "funds" referred to in the letter: that the funds be secured by a letter of credit sufficient to insure payment to Aerotron.
Moreover, the district court could properly have admitted extrinsic evidence to explain the contract on the alternative ground that the November 1 letter was not integrated: i.e., it was not the complete and final agreement of the parties. To determine whether a contract is integrated, the court should consider: (1) whether the writing appears to state a complete agreement; (2) whether the alleged oral agreement directly contradicts the writing; (3) whether the oral agreement naturally would be made as a separate agreement, and (4) whether extrinsic evidence might mislead the jury. Sullivan, 611 F.2d at 264. Here, the November 1 letter on its face appears to state the complete agreement of the parties. Consideration of the surrounding circumstances, however, makes it apparent that Aerotron did not intend the November 1 letter to comprise the entire agreement of the parties. The letter merely confirms the agreement that was made during the telephone call. The alleged additional terms do not directly contradict anything in the November 1 letter; they describe the "funds" Eastern is to receive and clarify the additional agreement that Eastern will not release the plane to the Liberians unless an adequate letter of credit is provided. This additional agreement might have been expected to be included in the November 1 letter, but it would not certainly have been included. Masterson v. Sine, 68 Cal.2d 222, 228 (1968) (additional agreement inadmissible if it certainly would have been included in the writing). Finally, whether the evidence would mislead the jury is a question of the credibility of Aerotron's witnesses and rests within the discretion of the trial judge. Here, the district judge properly determined that Aerotron's witnesses met the threshold level of credibility required to allow the matter to go to the jury. There has been no showing that Aerotron's witnesses were so incredible that the district court abused its discretion in admitting the evidence.
The district court did not err in admitting parol evidence. The breach of contract claim was properly presented to the jury.
II. Promissory Estoppel
Eastern claims the district court erred in permitting the issue of promissory estoppel to go to the jury. This claim also lacks merit.
First, Eastern contends that promissory estoppel was not at issue because it was not raised in the complaint or in the pretrial order. This is incorrect. The pretrial order expressly listed the following issue of law: "Did Aerotron rely to its detriment on any promise made by Eastern?" This statement was adequate to put promissory estoppel at issue. See Raedeke v. Gilbralter Savings & Loan Ass'n, 10 Cal.3d 665, 672 (1974).
Next Eastern notes that promissory estoppel is inapplicable when there is a bargained for exchange, see Walker v. KFC Corp., 728 F.2d 1215, 1220 (9th Cir.1984), and argues that Eastern bargained for Aerotron's release of the plane. Aerotron submits that a promissory estoppel instruction was appropriate because the jury could properly have found no contract to exist between the parties and that Aerotron delivered the plane to Eastern in detrimental reliance on Eastern's promises not to release the plane to the Liberians without adequate payment. The facts support Aerotron's promissory estoppel theory. If the jury believed that the November 1 letter did not create a complete binding contract, the jury could have found that Aerotron released the plane in reliance on Eastern's promises. Walker involved an existing agreement that the jury found had not been breached. Id., at 1218. In this case, the alternative theories of recovery set forth in the jury instructions were proper, because the jury could properly have found that no binding contract was ever created.
Eastern further argues that the promissory estoppel instructions were prejudicially erroneous because the court instructed the jury that Aerotron had a statutory right to retain any aircraft in which it had invested materials or labor. Cal. Code of Civ.Proc.Ann. § 1208.62 (West 1982). This instruction was crucial because, unless Aerotron had a right to retain the plane, it could not establish detrimental reliance by virtue of the plane's release. The instruction was proper because the district court properly determined, as a matter of law, that Eastern had no legal right simply to take the plane from Aerotron. At best, under the statute on which the instruction was based, Eastern could have taken Aerotron to court and attempted to prove that Aerotron waived its right to hold the plane on June 8 when it waived its lien rights.
The promissory estoppel claim was properly submitted to the jury.
III. Fraud and Conspiracy
Eastern claims that Aerotron presented insufficient evidence to permit the claims for fraud and conspiracy to go to the jury. Although Aerotron's evidence on the fraud and conspiracy claims was weak, sufficient evidence did exist to send these claims to the jury.
Negligent misrepresentation is not a proper basis of recovery since Aerotron admits in its briefs that it failed to produce evidence of negligent misrepresentations.
Eastern first argues that the parol evidence rule bars evidence of Eastern's oral promises. As has been shown, evidence of Eastern's promises was admissible because the November 1 letter did not constitute the complete agreement between the parties and because the letter was ambiguous. Moreover, it was reasonable for the jury to conclude that promises made subsequent to the November 1 letter were consistent with the terms of that letter. A "false promise which is independent of or consistent with matters covered by the agreement has been held to be admissible." Coast Bank v. Holmes, 19 Cal.App.3d 581, 591 (1971). The oral promises were properly considered.
Eastern next argues that Aerotron presented no evidence of intent to defraud or of any conspiracy. Evidence of such intent could properly have been implied from the entire course of dealing between the parties and by the wording of the November 1 letter and the November 9 telex message. Although the evidence of conspiracy was slim, a civil conspiracy "may be inferred from the nature of the acts done, the relation of the parties, the interests of the alleged conspirators, and other circumstances." Wyatt v. Union Mortgage Co., 24 Cal.3d 773, 785 (1979). Here, Eastern and World Jet were both paid in full, only Aerotron lost out. The course of dealing between the parties was sufficient to produce an inference that Eastern and World Jet had arranged the last minute change in the mechanics of the payment. Fraud and conspiracy were properly presented to the jury, and from that evidence the jury could reasonably conclude that Eastern and World Jet conspired to defraud Aerotron of its promised payment. Wyatt, 24 Cal.3d at 786.
IV. Verdict Form
Eastern attacks the use of a verdict form that set the amount of compensatory damages at $316,362.42, arguing that the jury could have found in favor of Aerotron but in a lesser amount. Eastern is incorrect. The record does not support any other possible amount owed by Eastern to Aerotron. It therefore was appropriate for the court to direct the jury as to the proper amount of compensatory damages. See Gough v. Rossmoor Corp., 487 F.2d 373, 377 (9th Cir.1973).
V. Prejudgment Interest
Finally, Eastern contends that the district court improperly included the amount of prejudgment interest on the verdict form after sustaining Eastern's objection to the proffered instructions on prejudgment interest. The district court properly determined that prejudgment interest under California Civil Code Section 3287(a) was inappropriate. That section provides for mandatory prejudgment interest when a claim is liquidated. Here, the contract and promissory estoppel claims were not liquidated.
California Civil Code Section 3288 provides for discretionary prejudgment interest in a fraud case. An instruction concerning discretionary prejudgment interest might have been appropriate, along with an appropriate space on the verdict form, but no such instruction was offered. The award of prejudgment interest must be reversed.
CONCLUSION
The district court's award of compensatory and punitive damages is AFFIRMED and the award of prejudgment interest is REVERSED.
This is to confirm our agreement that Eastern will accept funds from the Republic of Liberia for the account of World Jet-Aircraft Industries Ltd. in payment for one Boeing 727-100 aircraft, Serial No. 18253. Upon receipt Eastern will make payment to Aerotron for the benefit of World Jet-Aircraft Industries based upon receipt of a final invoice from Aerotron.
This payment to Aerotron shall be subject to (a) receipt by Eastern of the above-described payment from the Republic of Liberia, (b) there being sufficient funds transferred to Eastern to pay all amounts due Eastern from World Jet-Aircraft Industries and payment of the above-described invoice from Aerotron, (c) the amount due Aerotron not to exceed $380,000 and (d) the agreement of Aerotron to release the aircraft for flight from Aerotron's facilities in California to Eastern's facilities in Miami, Florida prior to this transfer of funds.
If the above accurately describes your understanding of our agreement, please so indicate by executing and returning to me one copy of this letter.
The letter was signed by Dutton. Finley executed the letter on behalf of Aerotron as requested in the last paragraph.