Giotis v. Lampkin ( 1958 )

QUINN, Associate Judge.

Appellee, plaintiff in the trial court, filed a complaint against appellant which alleged a material breach of a written contract of sale of a business and fraud, and sought money damages in the amount of $3,000 and cancellation of a $3,200 note which represented the balance due on the purchase price. Appellant denied the allegations and counterclaimed for the balance due on the note. After a trial on the merits, the court, as the docket entry recites, awarded appellee a judgment of $800 on his claim and also judgment for him on appellant’s counterclaim. The court also orally ordered cancellation of the note.

The chief contention raised by appellant on the original hearing of this appeal was that the judge erred in admitting and treating as legally operative parol evidence of an alleged oral covenant made by appellant not to engage in a competing business. After the original argument we ordered sua sponte a reargument on the question of whether the Municipal Court had jurisdiction of the action in view of the fact that the complaint sought $3,000 damages and cancellation of a $3,200 note. A majority of this court have concluded (1) that the claim actually asserted was within the court’s monetary jurisdiction, and (2) that on the merits the trial judge committed no reversible error. We shall consider the second point first.

The circumstances leading up to the signing of the written contract were as follows: Appellant was the owner of a small delicatessen business located in the District of Columbia. Appellee was employed by the government and had no prior business experience. He became interested in procuring appellant’s business. As a consequence he employed an attorney to represent him in the purchase. There is no indication in the record as to whether appellant had the benefit of counsel at the time the parties were negotiating the sale. A detailed five-page contract was drawn up and signed by the parties and by appel-lee’s attorney as a witness. The agreement provided, among other things, for a down payment on the purchase price and the remainder to be paid in installments secured by a chattel deed of trust. It contained a complete inventory of the fixtures and equipment; it provided for the payment of debts, the securing of the lease and various licenses, and a guarantee of gross income for a six-month trial period. Appellee was also required to obtain insurance and denied the right to assign the contract without appellant’s consent.

Appellee testified, over objection, that appellant orally told him prior to the signing that he was going to Albania to visit his family, and promised that he would not again engage in business in the District. The written contract contains nothing on this subject, and there is no apparent explanation revealed by the record or suggested by counsel in their briefs here for the omission. Final settlement took place on November 1, 1955, and around January 1, 1956, appellant began operating substantially the same type of business about one block away. On May 1, 1956, appellee was forced to close.

The trial court admitted the parol evidence of the alleged oral covenant not to compete, held that appellant had breached the agreement, and granted appellee the relief sought.

The general rule is that when the parties to a contract have reduced their entire agreement to writing, the court will disregard and treat as legally inoperative parol evidence of the prior negotiations and oral agreements. There are three important exceptions to this principle: first, where a party has been induced by a fraudulent misrepresentation to enter the contract; second, the doctrine of “partial integration,” i. e., where the parties have not intended that the written document cover all of their subjects of negotiation but only certain of them; third, the case of “collateral contract” in which the oral contract sought to be proved is separate from and independent of the written contract. Appellee urges in effect that parol evidence of the alleged oral covenant in this case was properly admitted under any of these three exceptions to the general rule. We shall consider each of these situations in order.

Initially, appellee contends that appellant’s oral promise not to compete was fraudulent since not two months later he broke it, and that as a consequence the contract was voidable at his option. We cannot agree. “Fraud” sufficient to vitiate a contract is fraud in the narrow sense, i. e., a misrepresentation of a present or past fact. A mere promise to perform or not perform a future act, which is subsequently broken, is not embraced in the term as it is used here.¹ Assuming the truth of appellee’s parol evidence here, still it disclosed nothing more than a promise not to compete in the future and thus could not constitute fraud. The evidence, then, was legally immaterial and could furnish no basis for rescission under a theory of fraud.

Secondly, appellee urges that the evidence was properly considered under either the theory of partial integration or collateral contract.² In Mitchell v. David, D.C.Mun.App.1947, 51 A.2d 375 this court endorsed the practice recommended by Wigmore to be followed in this type of case.³ As pointed out there, the parol evidence is never excluded immediately, but comes in initially on a provisional basis. The true test to be followed in deciding whether the evidence shall finally be admitted is whether the parties intended that the writing embrace their agreement on the subject in question. If the court resolves that the parties did not have this intent, then the evidence is admitted. If the court holds that the writing was intended to cover the disputed negotiations, then the evidence, even if true, is legally immaterial and must be excluded.

The ultimate issue then concerns the intent of the parties. Intent is to be judged by an external standard; in Wig-more’s words, it must be sought “in the conduct and language of the parties and the surrounding circumstances.”⁴ The precise criteria bearing on this question are as numerous and as varied as the cases themselves, and are not easily susceptible of generalization.⁵ Nevertheless, certain standards usually recur: (1) the appearance and nature of the writing itself, i. e., whether it is comprehensive or merely devoted to a few of the possible subjects of negotiation; (2) the relative positions and experience of the parties themselves; (3) assistance of counsel in the preparation of the document; (4) whether the contract contains any expression at all on the subject involved. In this last connection, a large number of cases, which have been concerned with the problem in the instant case, have held that when “good will” is expressly conveyed in the writing, as was done here, this term includes the same subject matter as a covenant not to compete, and thus that the parol evidence should be excluded.⁶

In the present case the court orally stated that appellant “did not act in good faith when he entered into business within the short period of time so near the location that he had sold,” and also found that the statements made by him were an essential inducement of the written contract. Considering the entire evidence in this case, we cannot say that this finding is clearly erroneous.

The jurisdictional problem involved here is fully and accurately presented in the dissenting opinion, but we cannot agree with the conclusion reached there that this case is distinguishable from the case of Whelan v. Hirshon, 1956, 98 U.S.App.D.C. 82, 232 F.2d 339, which reversed our decision in Hirshon v. Whelan, D.C.Mun.App.1955, 113 A.2d 484, 486. We believe that a close reading of the record in this case in conjunction with the various opinions and the record, of which we may take judicial notice, in the Whelan case will disclose that all of the elements, factors, and cqnsiderations which contributed to the holding in Whelan are present here in one way or another. Consequently, we are bound to hold that the claim asserted here, as in Whelan, was one on a rescission and not for rescission, and thus that the Municipal Court had jurisdiction.

Other errors alleged are without merit.

Affirmed.

1 . 9 Wigmore on Evidence, § 2439(a), pp. 125-126 (3d ed. 1940).

2 . These two exceptions are very similar in many respects, and the tests used to determine whether they apply in a given case are substantially identical. We will, therefore, treat them together.

3 .9 Wigmore on Evidence, § 2430, pp. 97, 98 (3d ed. 1940).

4 . Id.

5 . See the annotation, 70 A.L.R. 752.

6 .Annotation, 11 A.L.R,.2d-1227, 1253-59.