Bruce A. Ungerleider v. Robert P. Gordon

PUBLISH
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT COURT OF APPEALS
U.S.
ELEVENTH CIRCUIT
JUNE 13 2000
______________________________
THOMAS K. KAHN
CLERK
No. 99-10767
_____________________________
D.C. Docket No. 95-00568-CIV-T-23E
BRUCE A. UNGERLEIDER, M.D.,
Plaintiff-Appellant,
versus
ROBERT P. GORDON,
HARVEST INTERNATIONAL OF AMERICA, INC.,
Defendants-Appellees.
____________________________________________
Appeal from the United States District Court
for the Middle District of Florida
____________________________________________
(June 13, 2000)
Before COX, Circuit Judge, GODBOLD and MESKILL*, Senior Circuit Judges.
MESKILL, Senior Circuit Judge:
*
Honorable Thomas J. Meskill, Senior U.S. Circuit Judge for the Second Circuit, sitting by
designation.
Plaintiff-appellant Bruce A. Ungerleider appeals from a judgment of the
United States District Court for the Middle District of Florida, Merryday, J.,
summarily disposing of his claims sounding in securities fraud, common law fraud,
contract, civil theft and conversion. The sole issue raised by Ungerleider on appeal
is whether the district court erred in holding that an alleged oral agreement could
not be enforced under the parol evidence rule. We find no error and affirm.
BACKGROUND
In 1991, Ungerleider began making a series of investments in defendant
Phoenix Information Systems, Inc. (Phoenix), a startup company attempting to
develop a travel reservations system for use in the United States and abroad.
Defendant-appellee Robert P. Gordon was the chairman and CEO of Phoenix, as
well as its largest shareholder. He was also the owner, chairman and CEO of
defendant-appellee Harvest International of America, Inc. (Harvest). Between
1991 and 1993, Ungerleider invested over $800,000 in Phoenix, and his interests in
the company were memorialized in over a dozen written agreements.
In 1992, Gordon and Harvest agreed to pay Ungerleider a finder's fee if he
was able to secure additional financing for Phoenix from certain sources, including
the prominent investor George Soros. Shortly thereafter, Gordon apparently also
arranged for Robert Conrads to pursue additional financing for Phoenix. Conrads
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succeeded in attracting Soros' interest in the investment. The defendants informed
Ungerleider that an outside investor had been found, but they refused to identify
him. The defendants also advised Ungerleider that the investor was unwilling to
proceed unless Ungerleider relinquished his contractual interests in Phoenix.
On April 15, 1993, Ungerleider, Gordon, Phoenix and Harvest entered into a
written agreement whereby Harvest and Phoenix were entitled to retain all the
money invested by Ungerleider; Ungerleider was to receive 1.2 million shares of
Phoenix; and all the prior agreements, including the finder's fee agreement, were
revoked. Two of the relevant provisions of the April 15 agreement are set forth
below.
NOW THEREFORE, in consideration of the premises and of the
undertakings and obligations herein contained and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree
as follows:
...
14. Entire contract. This Agreement contains the entire under-
standing of the parties and supersedes all previous verbal and written
agreements. There are no other agreements, representations, or
warranties not set forth herein.
Paragraph 5 of the agreement stated that Ungerleider was entitled to receive 1.2
million shares of Phoenix stock, and paragraph 3 stated that Ungerleider was
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"entitled to receive the [Phoenix] Common Stock referred to in paragraph 5 hereof
and no other stock or other consideration."
At the time the agreement was signed, Gordon conveyed to Ungerleider a
stock certificate for 1.2 million shares of Phoenix. Both parties agree that the
shares were not the same 1.2 million shares that Ungerleider was entitled to under
the agreement. Ungerleider alleged that he received these initial shares as part of a
contemporaneous parol agreement with Gordon to induce Ungerleider to sign the
written agreement. The defendants contended in the district court that these initial
shares were merely collateral until Ungerleider received the shares called for in the
written agreement.
Gordon shortly thereafter regained possession of the initial shares,
apparently by asking Ungerleider to return the stock certificate in order to effect a
corporate name change. When Ungerleider was unsuccessful in demanding the
return of the certificate, and after discovering that Soros was a significant source of
the additional financing, he filed this suit. The defendants moved to dismiss, and
the district court granted the motion in part and denied it in part. See Ungerleider
v. Gordon, 936 F. Supp. 915 (M.D. Fla. 1996). Ungerleider filed an amended
complaint, stating claims sounding in securities fraud, common law fraud, contract,
civil theft and conversion. The district court granted an automatic stay with respect
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to defendant Phoenix, which was entering into bankruptcy, and ultimately granted
summary judgment against Ungerleider on all claims in an unpublished decision.
The district court certified that its decision constituted a final judgment in
accordance with Fed. R. Civ. P. 54(b), and this appeal followed.
DISCUSSION
The sole issue on appeal is whether the district court correctly held that the
purported oral agreement between Ungerleider and Gordon was unenforceable
under the parol evidence rule. Ungerleider argues that the oral agreement was
enforceable as a contemporaneous agreement that induced the signing of the
written agreement. Ungerleider also argues that the parol evidence rule should not
apply because the reference to "other good and valuable consideration" in the
written agreement rendered the written agreement incomplete. For the reasons set
forth below, we reject these arguments and affirm the judgment of the district
court.
I
Florida law, of course, recognizes the parol evidence rule. "[E]vidence of a
prior or contemporaneous oral agreement is inadmissible to vary or contradict the
unambiguous language of a valid contract. This rule applies when the parties
intend that a written contract incorporate their final and complete agreement."
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Johnson Enters. of Jacksonville v. FPL Group, 162 F.3d 1290, 1309 (11th Cir.
1998) (citation and internal quotation marks omitted); see J.M. Montgomery
Roofing Co. v. Fred Howland, Inc., 98 So. 2d 484, 485-86 (Fla. 1957). The rule is
one of substantive law, not evidence, so it is applied by federal courts sitting in
diversity. See Johnson Enters., 162 F.3d at 1309 n.47.
Ungerleider argued before the district court that "parol evidence is
admissible to establish a contemporaneous oral agreement which induced the
execution of a written contract, though it may vary, change, or reform the
instrument." See Mallard v. Ewing, 121 Fla. 654, 664, 164 So. 674, 678 (1935).
Indeed, Florida courts recognize such an "inducement" exception to the parol
evidence rule. Johnson Enters., 162 F.3d at 1309-10 (citing Mallard). However,
the party submitting parol evidence under this exception carries a heavy burden of
proof. "The inducement exception ``requires the [oral] agreement to be shown by
evidence that is clear, precise, and indubitable; that it shall be found that the
witnesses are credible, that they distinctly remember the facts to which they testify,
and that they narrate the details exactly and that their statements are true.'" Id. at
1310 (alteration in original) (quoting Mallard, 121 Fla. at 664, 164 So. at 678).
The district court did not address Ungerleider's argument. Instead,
"[b]ecause of the specific and comprehensive nature of the written agreement," it
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gave no credence to the "oral representations which occurred after, and which
contradict, the written agreement." We need not remand for the district court to
consider the inducement exception in the first instance, i.e., whether there was
"clear, precise, and indubitable" evidence of the oral agreement, because we hold
as a matter of law that the inducement exception is inapplicable.
Under Florida law, the inducement exception does not apply where "the
alleged oral agreement relate[s] to the identical subject matter embodied in the
written agreement and . . . directly contradict[s] an express provision of the written
agreement." Linear Corp. v. Standard Hardware Co., 423 So. 2d 966, 968 (Fla.
App. 1 Dist. 1982); see also Bond v. Hewitt, 111 Fla. 180, 185, 149 So. 606, 608
(1933) ("[W]here a written instrument does not purport to contain the entire
agreement between the parties thereto, nor to have been intended as a complete
statement or whole contract, and where such instrument was executed pursuant to a
parol agreement and in part performance thereof, parol evidence is admissible
when consistent with, and not contrary to, such written instrument." (emphasis
added)). The Supreme Court of Florida made this clear in McComb v. Hygeia
Coca-Cola Bottling Works, 137 Fla. 260, 188 So. 219 (1939), in which it rejected
the plaintiff's claims that he was entitled to lifetime employment by virtue of an
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oral promise made to induce him to sign a release of liability. The court presented
the issue as follows:
When a release of a claim for personal injuries is executed and delivered
in the form, viz: "For the sole consideration of the sum of One Hundred
Sixty and 00/100 Dollars . . . received from Hygeia Coca Cola Bottling
Works, Inc., I do hereby acknowledge full satisfaction and discharge of
all claims . . .", can it be shown by parol testimony that there was a prior
or contemporaneous additional consideration for said release?
Id. at 265-66, 188 So. at 221. The court answered no. "If the plaintiff is allowed to
show on the trial of the cause other considerations flowing from the alleged injury,
then the rule against varying the terms of a written instrument will be violated." Id.
at 266, 188 So. at 222. The court expressly considered, but declined to follow,
Mallard. See id.
Here, the alleged oral agreement entitling Ungerleider to an additional 1.2
million shares of stock directly contradicts paragraph 3 of the written agreement,
which states that Ungerleider was "entitled to receive the [Phoenix] Common
Stock referred to in paragraph 5 hereof and no other stock or other consideration."
We see no distinction between paragraph 3 here and the reference to plaintiff's
"sole consideration" in McComb. The boilerplate "other good and valuable
consideration" referred to in the preamble of the written agreement is not enough to
avoid the obvious inconsistency between the alleged oral agreement and paragraph
3. Therefore, Ungerleider's reliance on the inducement exception is unavailing.
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The decision of the Florida Supreme Court in Jackson v. Parker, 153 Fla.
622, 15 So. 2d 451 (1943), is not to the contrary. In that case, the plaintiffs were
heirs intestate to Gladys P. Monroe, who, with her husband, had sold a home to
defendants Henry and Annibelle Jackson. The terms of the sale were that the
Jacksons would pay the Monroes $37.50 monthly, up to a total of $4,500, but only
while Gladys Monroe and her husband lived. To effectuate the sale, the Monroes
deeded the property to the Jacksons, who in turn executed and returned a
promissory note secured by a mortgage on the property. The Monroes shortly
thereafter executed a release for the note and mortgage, which they placed with the
note and mortgage in a safety deposit box. After Mrs. Monroe's death, the
executor of her estate refused to deliver the release to the defendants, but even
without it the defendants stopped making payments on the note. Mrs. Monroe's
heirs sought to foreclose, and the court was faced with the question of whether
parol evidence was admissible to determine the effect of the release and the
purpose of the various documents:
Here we have four written instruments -- a deed, a mortgage, a note, and
a complete release and satisfaction of the mortgage and note. Both the
mortgage and note and the release were found in the lock-box of the
mortgagee . . . something over seven years after the deed and mortgage
were executed. . . . [W]hy was the release executed long before most of
the payments on the mortgage note fell due, and why was the release not
actually delivered to the mortgagors immediately after it was executed,
or at least while the mortgagees were still living? Surely the mortgagees
9
had some object in view when they executed this release and acknowl-
edged it before a notary public soon after the mortgage was made to
them, though it then had nearly ten years to run, and then left the release
along with the mortgage and note in their lock-box at their bank. When
a person dies leaving in his lock-box a mortgage and also a release of
that mortgage, there must be some explanation somewhere, if it can be
found. What was the reason for leaving this release?
Id. at 636, 15 So.2d at 458-59. In deciding whether the parol evidence was
competent, the court set forth several principles of law, including the inducement
exception of Mallard that "parol evidence is admissible to establish a
contemporaneous oral agreement which induced the execution of a written
contract, though it may vary, change, or reform the instrument." Id. at 639, 15
So.2d at 460. However, the court was not relying on the inducement exception to
permit parol evidence to directly contradict the terms of a written agreement.
Instead, the inducement exception was one of several principles of law suggesting
that the court could consider parol evidence as to the purpose and effect of several
related documents, each duly executed and valid on their face. Cf. Navy Mut. Aid
Ass'n v. Barrs, 732 So. 2d 345, 347 (Fla. App. 1 Dist. 1998) ("Parol evidence . . . is
admissible to show the intent of the parties where several documents are part of
one transaction and must be considered in pari materia to understand the
transaction."). Therefore Jackson in no way undermines the holding of McComb
that parol evidence may not directly contradict a contemporaneous written
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agreement, even if the oral agreement was made to induce assent to the written
agreement. Indeed, the same rule is followed in other jurisdictions. See, e.g.,
Bernstein v. Financial Indem. Co., 263 Cal. App. 2d 324, 329, 69 Cal. Rptr. 543,
547 (Ct. App. 2 Dist. 1968); Cantrell v. Lemons, 119 Colo. 107, 109, 200 P.2d
911, 912 (1948); Pepsico Truck Rental v. Eastern Foods, 145 Ga. App. 410, 410-
11, 243 S.E.2d 662, 663 (Ct. App. 1 Div. 1978); Frimel v. Blake, 360 S.W.2d 258,
260-61 (Mo. Ct. App. 1962); Cornhusker Dev. & Inv. Group v. Knecht, 180 Neb.
873, 878, 146 N.W.2d 567, 571 (1966); Dora v. Dora, 392 Pa. 433, 437, 141 A.2d
587, 590 (1958); Gantt v. Van der Hoek, 162 S.E.2d 267, 272 (S.C. 1968); Hull-
Dobbs, Inc. v. Mallicoat, 57 Tenn. App. 100, 104, 415 S.W.2d 344, 346 (Ct. App.
1966).
In sum, the inducement exception permits parol evidence of a
contemporaneous oral agreement to "vary, change, or reform" a written instrument,
Mallard, 121 Fla. at 664, 164 So. at 678, but not to directly contradict it, McComb,
137 Fla. at 265-66, 188 So. at 221-22; Linear Corp., 423 So. 2d at 968. This will
not always be an easy distinction to draw, but the distinction appears elsewhere in
the parol evidence rule. For example, parol evidence is not necessarily barred if
the written agreement is incomplete, as long as the parol evidence does not
contradict the written agreement. Jackson, 153 Fla. at 637, 15 So.2d at 459;
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Mallard, 121 Fla. at 663, 164 So. at 678. Similarly, "[t]he rule does not necessarily
exclude extrinsic proof . . . that there exists a contemporaneous independent
agreement amounting to a separate transaction." Schwartz v. Zaconick, 68 So. 2d
173, 175 (Fla. 1953). However, even in that situation the parol evidence may not
contradict the terms of the written agreement. Anderson v. Ax, 104 Fla. 294, 298,
139 So. 798, 799 (1932); see also Schwartz, 68 So. 2d at 176 (declining to consider
parol evidence of contemporaneous oral agreement that makers of promissory note
were not required to pay interest as specified in note); Johnson v. Johnson, 403
So. 2d 1388, 1390 (Fla. App. 2 Dist. 1981).
Here, we have no difficulty in concluding that the parol evidence does more
than "vary, change, or reform" the written agreement. It directly contradicts the
written agreement. Therefore, it is not admissible under the inducement exception
to the parol evidence rule.
II
Finally, Ungerleider argues that the reference to "other good and valuable
consideration" rendered the written agreement incomplete. While that may
sometimes be the case, see Jackson, 153 Fla. at 637, 15 So.2d at 459, we do not
believe it to be the case here. This is not a case where the consideration recited
was so nominal that one would necessarily expect that other consideration was
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involved. Compare id. ("Both the deed and the mortgage expressed a consideration
of $10 ``and other valuable considerations.'"). Indeed, "[t]he chief and most
satisfactory index to determine the intent of the parties to an agreement as to
whether they intended their written contract to be a complete and final statement of
the whole transaction is whether or not the particular element of the alleged
extrinsic negotiation is dealt with at all in the writing." Greenwald v. Food Fair
Stores Corp., 100 So. 2d 200, 202 (Fla. App. 3 Dist. 1958). Here, the written
agreement was carefully drafted and lists in detail each of the previous agreements
that were revoked and each of the payments made by Ungerleider that Harvest and
Phoenix were entitled to keep. The agreement also states precisely where the
shares to which Ungerleider was entitled were to come from and how they were to
be registered:
a. from Harvest a certificate representing 511,000 shares of [Phoenix]
Common Stock, $.01 par value, registered in the name of [Ungerleider];
and
b. from [Phoenix] a certificate representing 689,000 shares of [Phoenix]
Common Stock, $.01 par value, registered in the name of Independent
Trust Corp. Cust. FBO Dr. Bruce Ungerleider Tr. No. 1205303 (243,000
[Phoenix] shares), Independent Trust Corp. TTEE FBO Dr. Bruce
Ungerleider Tr. No. 1608459 (58,500 [Phoenix] shares) and Bruce A.
Ungerleider, M.D. (387,500 [Phoenix] shares).
Under the circumstances, it is unreasonable to believe that Gordon would have
agreed to give an additional 1.2 million shares of Phoenix stock to Ungerleider in
13
an undocumented collateral agreement, or that Ungerleider would have accepted
such an informal agreement. Cf. Ungerleider, 936 F. Supp. at 916 ("The adversity
between the parties was palpable.").
Furthermore, the parties expressly stated that the agreement of April 15 was
a complete integration of the contract: "This Agreement contains the entire
understanding of the parties and supersedes all previous verbal and written agree-
ments. There are no other agreements, representations, or warranties not set forth
herein." Paragraph 3 of the agreement further emphasizes that the agreement
completely memorializes the parties' understanding as to the consideration due
Ungerleider. Those provisions should be given effect. See 4 Williston on Con-
tracts § 633, at 1014 (3rd ed. 1961) ("Since it is only the intention of the parties to
adopt a writing as a memorial which makes that writing an integration of the
contract, and makes the parol evidence rule applicable, any expression of their
intention in the writing in regard to the matter will be given effect.").
Finally, even if the agreement were incomplete, Florida law "does not permit
proof of an oral agreement for the purpose of imposing a further contractual
obligation on one of the parties, of which there is no indication or suggestion in the
written contract, when such obligation is not only inconsistent with, but repugnant
to, other plain terms of the instrument." Florida Moss Products Co. v. City of
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Leesburg, 93 Fla. 656, 661, 112 So. 572, 574 (1927); Jackson, 153 Fla. at 637, 15
So.2d at 459. The purported oral agreement here is "not only inconsistent with, but
repugnant to," the written agreement, and it is therefore unenforceable.
CONCLUSION
The district court's judgment is AFFIRMED.
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