Court Opinion

ID: 9479191
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:10:53.166966+00
Date Added: 2024-06-11T17:46:52.623329
License: Public Domain

HENDERSON, Senior Circuit Judge,
dissenting:
While I can concur in much of the majority’s opinion, the court and I part company *1536on the question of whether the district court correctly applied the parol evidence rule. I would answer this question in the negative, and since “everything was wrapped in the enigma of a general verdict,” I would remand the case for a new trial. See E.L. Cheeney Co. v. Gates, 346 F.2d 197, 200 (5th Cir.1965).
My disagreement with the majority’s opinion begins with its conclusion that the district court implicitly found that the written contract was not integrated and that the parties did not intend the signed, clear and unambiguous writing as the final expression of their agreement. It ends with the court’s overenthusiastic embrace of a confusing — and in my opinion erroneous— jury charge which, despite the court’s attempts to finesse the issue, rather clearly compelled the jury to assume the trial court’s responsibility to rule on a critical question of fact, i.e., whether, in light of the document itself, the conduct and language of the parties and all the surrounding circumstances, Intercorp and Pennzoil intended that the written contract be the final word on their agreement, displacing any oral agreement(s) to the contrary which may or may not have been reached during the negotiations leading up to the execution of the writing.
Intercorp is attempting to enforce oral promises allegedly made prior to the execution of the written agreement. The terms of this alleged antecedent verbal deal are in direct conflict with the terms contained in the contract. Intercorp’s position, therefore, raises two fundamental fact questions. The obvious one is whether oral agreements were made as contended by Intercorp. But before the trier of fact can consider this problem, the other, injected by the parol evidence rule, must be settled. This preliminary issue involves the finality of the writing. The integrity of a written contract, its ability to displace earlier agreements, is a legal concept, and whether a contract was exclusive, final or neither is a question of law. However, it is a question of law that turns on a pure issue of fact, the intent of the parties. Although normally the jury would be asked to resolve a fact question such as this one, the parol evidence rule works a change in the usual division of labor between judge and jury, reserving to the court the issue of the parties’ intent. The parol evidence rule directs the court to make the factfinding first and then rule on the completeness of the contract. The judge’s decision determines whether, and to what extent, parol evidence of prior understandings will be admissible to show the existence in fact of such antecedent agreements, a question which will be answered, if necessary, by the jury.
At this point it should be instructive to pause to consider what the trial court is deciding at this stage of the proceedings, and what it is not. As Professor Wigmore explained,
There is a preliminary question for the judge to decide as to the intent of the parties, and upon this he hears evidence on both sides; his decision here, pro or con, concerns merely this question preliminary to the ruling of law. If he decides that the transaction was covered by the writing, he does not decide that the excluded negotiations did not take place, but merely that if they did take place they are nevertheless legally immaterial. If he decides that the transaction was not intended to be covered by the writing, he does not decide that the negotiations did take place, but merely that if they did, they are legally effective, and then he leaves to the jury the determination of fact whether they did take place.
In this anomalous process, it merely happens that some of the conduct and other data which are at first resorted to evidentially on the question of intent are usually identical with the conduct that may subsequently be treated as legally inoperative; but this is a mere coincidence. The two vital differences are, first, that they are looked at for different purposes, and second, that they may be dealt with by different branches of the tribunal.
9 Wigmore on Evidence § 2430, at 99 (Chadboum rev. 1981) (emphasis in original; footnotes omitted). It is important to emphasize that the trial court’s ruling on *1537the question of finality is controlling as to the legal status of alleged prior agreements. Thus, while the jury may be permitted to determine whether an antecedent parol agreement was made and the terms of the oral agreement, it does so only after the judge has determined that such prior promises, if made as alleged, would constitute legally enforceable obligations.
Why the law developed a rule which alters the ordinary allocation of duties between judge and jury is a primary consideration in understanding the necessity for the parol evidence rule. In the words of one scholar,
[WJhile special devotion to the written word may have provided the origin of the parol evidence rule, the pervasive attitude that judges provide the best protection against perjured testimony probably has been the reason for its continued viability. A distrust of the jury as a reliable mechanism for divining truth underlies the parol evidence rule. Left to their own devices, jurors may favor underdogs by relying upon alleged oral terms, thereby deciding the case in a manner calculated to avoid a perceived injustice. Jurors also may lack the sophistication needed to deal effectively with complex commercial transactions involving numerous alleged oral and written contract terms.
M. Metzger, the Parol Evidence Rule: Promissory Estoppel’s Next Conquest?, 36 Vand.L.Rev. 1383, 1387-88 (1983) (footnotes omitted). Thus, the parol evidence rule both “promotes the use of, and protects, written agreements; and it gives the trial judge a polite means of keeping suspect oral evidence from the jury.” G. Wal-lach, The Declining “Sanctity” of Written Contracts — Impact of the Uniform Commercial Code on the Parol Evidence Rule, 44 Mo.L.Rev. 651, 654 (1979). Influencing the UCC’s version of the rule was the view which sees it as the “insurer that the final expression of intent governs.” Metzger, supra, at 1390. According to this school of thought, “[cjourts exclude oral or written terms extraneous to such a writing not because doubt exists concerning the terms’ reliability, but rather because the terms are irrelevant, since the parties superseded them in the final integrated writing.” Id. (footnotes omitted). By design, then, the parol evidence rule interposes the judge as a special check on the jury’s presumed propensity either to credit incredible testimony at the expense of a written agreement, or to enforce antecedent agreements it believes actually were made, regardless of the parties’ intent that preliminary understandings be superseded by a written agreement.
As the foregoing passages indicate, the parol evidence rule’s insistence that the trial court settle the issue of the contract’s finality before permitting the jury to determine the existence in fact of prior oral agreements is no mere technicality. It is the essence of the rule. Whether or not the fears guarded against by the rule are well founded, the parol evidence rule remains a part of the commercial law, and Pennzoil was entitled to its protection. Yet, despite the critical significance of the finality question in this case — Pennzoil’s liability rises or falls on its disposition — the majority is content to assume that the district court implicitly ruled that the parties did not intend the written contract as the final expression of their agreement. Because I believe the parol evidence rule is supposed to assure the party opposing the extraneous evidence that the court’s undivided attention and special expertise are directed to resolving the conflict of whether the written contract was intended to reflect the final agreement of the parties, I would hold that the rule requires an explicit ruling on this issue.
But even if I were to agree with the court that a secret finding fulfills the trial judge’s obligation, the majority does not persuade me that the district court conducted such an inquiry in this case. The majority seizes upon a couple of remarks by the district court in response to a pair of Pennzoil’s objections to the jury instructions, characterizing the comments as the functional equivalent of a finding that Pennzoil and Intercorp did not intend the written contract as the last word on their deal. The statements relied upon by the majori*1538ty, however, do not provide a solid basis for its conclusion.
The first example cited by the court is the following colloquy between the district judge and counsel at the charge conference:
MR. PAGE [counsel for Pennzoil]: In Paragraph 6, ‘Intercorp claims that Pennzoil maintained a duty to disclose that Pennzoil did not intend for Intercorp to have an exclusive distributorship.’ There’s no testimony that anybody ever said it was going to be an exclusive distributorship. The only testimony is that it was going to be exclusive in nature and that the distributor’s rights would be protected. So, we would say that’s an improper comment on the evidence and it’s contrary to the evidence.
THE COURT: I don’t see that as anything but an exclusive distributorship. I don’t understand the distinction you think you see. I don’t see it.
The court later added, “But I think your [sic] quibbling over words when you say that the use of the term ‘exclusive distributorship’ doesn’t belong in the charge. I overrule that.” The instruction to which Pennzoil was objecting dealt with the plaintiff’s theory of fraudulent concealment, explaining Intercorp’s allegation that Pennzoil had a legal duty to disclose its intent that the distributorship not be exclusive. In my opinion, the majority reads too much into the judge’s observations when it states that these evince the court’s recognition “that the parties agreed to an exclusive distributorship when the writing stated otherwise.” At 1582. Rather, the statements to me suggest that the district court saw no distinction between an agreement that the distributorship be “exclusive in nature” and an agreement that the distributorship be “exclusive,” and therefore it overruled Pennzoil’s objection that the use of the term “exclusive” constituted an improper comment on the evidence. Besides, whether there was in fact an antecedent oral agreement on that subject was a jury question. Moreover, even if the majority is correct in assuming that the district court’s declarations betrayed its belief that such an agreement had been reached, that fact alone would not be dispositive of whether the parties intended the antecedent oral agreement to survive the written contract. It is, of course, possible that such an agreement was made initially, but later abandoned in favor of the terms contained in the formal contract. But the majority seems to have overlooked that possibility. The danger here is that the district court did too.
The second example offered by the majority is similarly unconvincing. As explained by the court, the district judge overruled Pennzoil’s objection to the “Hib-bett charge” which stated, among other things, “To the extent Intercorp proves by a preponderance of the evidence that the written contract was not the actual agreement of the parties, the written contract is simply untrue.” The majority reasons that the district court could have ruled so only if it had earlier determined the parties’ intent with regard to the integration of the contract. Even if I agreed that the so-called “Hibbett charge” asked the jury only the permissible question of whether an earlier oral agreement actually had been made— and, as I shall explain in detail below, I do not concede that point — in the absence of an express ruling, the court’s refusal to sustain Pennzoil’s objection merely begs the question whether the district court had made the required finding on the completeness of the contract. The majority conveniently ignores the possibility that the district court erred by failing to make the requisite finding on the parties’ intent before submitting the question of the oral agreement’s existence to the jury.
Furthermore, my review of the record convinces me that the judge did not rule on the parties’ intent. Instead, it appears that the district court felt it was not required to make a finding on this issue, either (1) by virtue of the fraud exception to the parol evidence rule, or (2) the exception announced by the Alabama Supreme Court in Hibbett Sporting Goods v. Biernbaum, 375 So.2d 431 (Ala.1979).
First, I rely upon the reason given by the district court in overruling Pennzoil’s objection, early in the trial, to the introduction *1539of testimony about preliminary discussions respecting exclusivity. In so ruling, the district court explained, “there is a fraud allegation.” ROA 7-28. However, as the majority holds, in this case the fraud exception would not relieve the court of the obligation to rule on the contract’s finality. At 1530-31. Thus, the district court’s misplaced reliance upon the fraud exception suggests that it may have, on that basis, failed to consider the finality issue.
Second, the district court clearly treated the Hibbett case as persuasive, if not controlling, authority. The language of Hib-bett echoes throughout the relevant portion of the jury instructions, especially the charge that the written contract was “simply untrue” to the extent Intercorp proved that it was not the parties’ “actual agreement.” 1 In Hibbett, the court held that where parties to a written contract (1) do not dispute that a prior, contradictory oral agreement was made and (2) acknowledge that the contract “signed by them was not a true and complete expression of their agreement,” Hibbett, 375 So.2d at 436, then the “parol evidence rule has no field of operation” and the trial court is precluded, as a matter of law, from finding that the contract was intended as an integration, id. Consequently, where a trial court in Alabama confronts the unique facts of Hib-bett, it is relieved of the obligation to rule on the question of finality. But, as the majority acknowledges, at 1532, the facts of the instant case are not analogous to the ones in Hibbett. As a result, the district court was not entitled to decline to rule on the finality question as in Hibbett. Yet the district court’s use of Hibbett to formulate the jury instructions suggests that it may have done exactly that.
Finally, and most important, I am unable to infer that the district court made the required finding of fact because the district court submitted this very issue to the jury. The jury was compelled to assume the court’s responsibility when the court charged, “If the contract signed by Inter-corp and Pennzoil does not reflect the agreement of the parties and was not intended to reflect the true agreement of the parties, then you may disregard such portions of the writing as you deem to be in conflict with the true intent of the parties.” (Emphasis added.) Clearly, this instruction conditions the jury’s ability to disregard the writing on its decision first that the writing was not intended as a final expression of the parties’ agreement. If the district court implicitly had made this finding as required by the parol evidence rule, then why would it submit the question to the jury to reexamine?
The rest of the relevant portion of the charge supports this position as well:
It is for you to determine the true agreement of the parties based upon all the evidence. In this regard, you may consider the writings signed by the parties, the course of performance of the parties, and assurances made by the parties prior to and during the course of performance of the agreement, as to the meaning of the agreement. To the extent Intercorp proves by a preponderance of the evidence that the written contract was not the actual agreement of the parties, the written contract is simply untrue. The fact that the contract may contain a clause stating that the written contract contains the complete agreement of the parties would therefore also be untrue.
If Intercorp proves by a preponderance of the evidence that the written agreement does not reflect the true agreement of the parties, then you may consider the evidence produced at trial as to the true meaning of the agreement. (Emphasis added.)
In these confusing instructions, the jury was told that it had to determine the parties’ “true intent,” “true agreement,” their “actual agreement” and “the true meaning *1540of the agreement.” To arrive at the “true agreement,” (which means, presumably, the one which is legally enforceable) as instructed, the jury quite obviously was required to choose between the written agreement and the alleged antecedent oral agreement if it believed one was in fact made. To choose correctly, the jury necessarily was required to settle the issue of the parties’ intent. How else could it conclude that the “written contract was not the actual agreement of the parties”? The true agreement charge, in my view, essentially collapsed what was supposed to be a two-part process, with the initial question of intent handled by the judge followed, if necessary, by the jury’s finding as to whether prior agreements were made and if so the content of the oral understandings, into a single directive to find the “actual agreement.” The jury, however, should not be forced to determine which of two conflicting agreements is enforceable. That is the judge’s burden. Here, the charge imposed the court’s work on the jury, which indicates to me that the court did not attempt the task itself.
Moreover, this jury instruction is a misapplication of Alabama law. Both the Code and Hibbett clearly assign to the trial court the job of determining whether the parties intended that a writing be a final or complete expression of their agreement. The district court erred by failing to fulfill this initial obligation, and it compounded the error by allowing the jury to find and enforce prior oral agreements under the “true agreement” rubric. The court’s method ensured that “[t]he jury, rather than the trial judge, ruled on the parol evidence question, an approach that emasculates the parol evidence rule and that virtually guarantees enforcement of parol promises that the jury believed the parties actually made.” Metzger, supra, at 1445 (footnote omitted).2 A new trial ordinarily is warranted where the “trial court has submitted to the jury an issue not proper for its consideration.”3 Mark Seitman & *1541Associates, Inc., v. R.J. Reynolds Tobacco Co., 837 F.2d 1527, 1532 (11th Cir.1988). I therefore would reverse the judgment in favor of Intercorp and remand for a new trial.

. In Hibbett, the court wrote:
To the extent, then, that the written lease contradicts the actual agreement of the parties, it is simply untrue, and the presence in the writing of a merger clause is immaterial. Paper and ink possess no inherent power to cause statements to be trae when they are actually untrue, and a provision in a writing that there exist no previous understandings or agreements not contained therein is merely a statement which actually may be untrue.
Hibbett, 375 So.2d at 435.

. The author was referring to a charge which, like the one in the instant case, directed the jury to consider the parties’ intent:
Further, you are instructed that if you find from the evidence that the agreement between the parties was not intended to be contained solely in the written option and franchise agreements, but rather included additional written or oral terms, then such additional written or oral terms may be enforced and damages may be awarded for breach thereof, just as though these portions had appeared in the written agreement.
Walker v. KFC Corp., 515 F.Supp. 612, 617 (S.D.Cal.1981), modified, 728 F.2d 1215, 1220 n. 4 (9th Cir.1984) (because circuit court of appeals set aside verdict on another ground, it did not rule on whether district court had erred by sending question of contract integration to jury).

. Provided a proper and timely objection was made at trial. The majority suggests (but stops short of holding) that Pennzoil failed to preserve this issue for appeal. However, as the court acknowledges, “Pennzoil argued that the court should not give a Hibbett instruction in this case.” At 1534 n. 7. By objecting to the Hibbett instruction, which loosed the jury to find the “actual agreement,” Pennzoil necessarily objected to the submission of the finality question to the jury, because a search for the "true agreement,” properly conducted, looks first to the intent of the parties. The instruction was, as Pennzoil complained, "completely contrary to the UCC, and was an improper statement of the law.”
Of course, Pennzoil was objecting primarily to permitting the jury to determine whether prior oral agreements were made, because the district court had not found that the written contract was not intended as a complete integration. Because Pennzoil had not received an express ruling on the finality question, I believe it was justified in objecting to the charge on the ground that it allowed the jury to credit parol evidence at the expense of the written agreement. To the extent the majority indicates that Pennzoil should have demanded a ruling on the parties’ intent at the eleventh hour of the trial, I disagree. Pennzoil was entitled to that finding much earlier in the proceedings. To wait until the charge conference to issue the ruling — conduct the majority apparently approves — is a poor way to resolve a dispute over integration.
In sum, I believe that Pennzoil’s objections were sufficient to preserve the issue for appeal. It seems to me that Pennzoil adequately pointed to the objectionable instructions, said that they were contrary to the UCC and an improper statement of the law and said that Intercorp should not be able to "go around” the law with the "true meaning business” by asking the jury to disregard the signed writing if they find that the parties did not intend for it to be a complete expression. Admittedly, Pennzoil’s objections are neither the most artful nor precise imaginable, but they do serve to draw attention to the problem area. Based on PennzoiTs objections, I believe it would be incorrect either to (1) as*1541sume that the trial judge knew the law and followed it; or (2) hold that Pennzoil waived the error by not objecting on the ground now urged on appeal. I am confident that the objection put the court on notice of its meaning. After all, the burning issue throughout the trial was whether the parties intended the written contract as their complete agreement.