Raiczyk v. Ocean County Veterinary Hospital

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
7-30-2004
Raiczyk v. Ocean Cty Veterinary
Precedential or Non-Precedential: Precedential
Docket No. 02-1070
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"Raiczyk v. Ocean Cty Veterinary" (2004). 2004 Decisions. Paper 423.
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PRECEDENTIAL (Opinion filed: July 30, 2004)
UNITED STATES COURT OF
APPEALS Mario A. Iavicoli, Esquire (Argued)
FOR THE THIRD CIRCUIT 43 Kings Highway West
Haddonfield, NJ 08033
No. 02-1070 Counsel for Appellant
_______________
John E. MacDonald, Esquire (Argued)
GARY RAICZYK, Stark & Stark
993 Lenox Drive
Appellant Princeton Pike Corporate Center
v. P.O. Box 5315
Princeton, NJ 08543
OCEAN COUNTY VETERINARY
HOSPITAL; Counsel for Appellees
DR. PETER M. FALK; DR. ALBERT M.
PAGANI;
GEORGE ELLIOT; MOKEL, VOGEL &
ELLIOT, A PROFESSIONAL
ASSOCIATION; PETER S. HENNES, OPINION
ESQ.;
BIELORY & HENNES, A
PROFESSIONAL CORPORATION; ROTH, Circuit Judge:
DONALD COW AN; JOSEPH A judge may overturn a jury verdict
GUNTESKI; only when, “as a matter of law, ‘the record
COWAN & GUNTESKI AND CO., A is critically deficient of that minimum
BUSINESS ENTITY; quantity of evidence from which a jury
EDWARD F. LISTON, JR., ESQ. might reasonably afford relief.’” Dudley
________________ v. S. Jersey Metal, Inc., 555 F.2d 96, 101
(3d Cir. 1977) (quoting Denneny v. Siegel,
Appeal from the United States 407 F.2d 433, 439 (3d Cir. 1969)). In this
District Court for the District of New case, the District Court overturned two
Jersey awards granted by the jury. The jury
(D.C. Criminal Action Nos. 98-cv-02892) awarded plaintiff, Dr. Gary Raiczyk,
District Judge: Honorable Anne E. $113,431, for monies owed to him for sale
Thompson of his shares in a professional corporation
and an additional $22,500 to repay unpaid
officer loans that Dr. Raiczyk had made to
Argued on October 14, 2003 the corporation. The District Court ruled
Before: SLOVITER, ROTH and that, as a matter of law, Dr. Raiczyk was
CHERTOFF, Circuit Judges not entitled to either amount.
We do not agree with the District an integration clause, stating that it was the
Court’s conclusion that, as a matter of law, final and only document memorializing the
there was insufficient evidence in the agreement. There was no mention in the
record to support the finding that Dr. sales agreement of the outstanding loans
Raiczyk was entitled to the $22,500 for the that Dr. Raiczyk claimed were owed to
unpaid officer loans. We do agree, him by the corporation.
however, that there was insufficient The doctors conducted various
evidence to support the jury’s verdict of negotiations on the timing and final
$113,431 for Dr. Raiczyk’s shares of payment amount for the buyout. On April
stock. We will therefore affirm the 17, 1997, pursuant to the sales agreement,
District Court’s disallowance of the award Dr. Raiczyk was faxed a closing statement
for the sale of the shares in the veterinary that set a total price of $206,975.21 for his
hospital, but we will reverse the District shares. Dr. Raiczyk initialed this amount
Court’s judgment against Dr. Raiczyk on in two places, signed the document, faxed
the $22,500 in officer loans, and we will the closing statement back to the
remand this case to the District Court with defendants’ attorney that same day, and
instructions to reinstate the jury’s verdict later had his signature on the document
for that amount. notarized.
I. Factual Background and Procedural Approximately six months later, Dr.
History Raiczyk concluded that he was owed more
The plaintiff, Dr. Gary Raiczyk, and money under the agreement. On June 18,
the defendants, Dr. Albert Pagani and Dr. 1998, Dr. Raiczyk filed suit, asking that
Peter Falk, practiced veterinary medicine the court reform the contract due to
at Ocean County Veterinary Hospital. The mistake. He sued his former partners,
hospital was owned by OCVH, Inc., a demanding to be paid an additional
professional corporation, in which Drs. $114,131.14 for the sale of his shares of
Raiczyk, Pagani, and Falk were stock. Dr. Raiczyk claimed that he was in
shareholders. The shareholder agreement a hurry on the day that he signed the
between the parties called for a mandatory closing statement, did not have the
buy-out if one of the doctors wanted to document reviewed by a lawyer or
leave the practice. On July 1, 1996, Dr. accountant, and thus only later caught the
Raiczyk informed the other doctors that he mistake. In addition, Dr. Raiczyk sought
wished to leave the practice and was the money owed him for the still unpaid
exercising his option to sell his shares of officer loans in the amount of $45,000.
stock in the corporation. A fter Defendants responded that Dr. Raiczyk
negotiations, all parties signed a sales was paid the full amount agreed upon for
agreement on December 31, 1996, which his shares and that the officer loans were
included arguably ambiguous terms as to included in the sales price. They argued
how the final price for the shares would be that the integration clause in the sales
calculated. The sales agreement contained agreement clearly covered those loans.
2
The matter was tried before a jury, “the record is critically deficient of that
and on September 13, 2001, the jury minimum quantity of evidence from which
returned a verdict in favor of Dr. Raiczyk a jury might reasonably afford relief.” Id.
on both issues. On December 3, 2001, (quoting Powell v. J.T. Posey Co., 766
however, the District Court ruled as a F.2d 131, 133-34 (3d Cir. 1985)).
matter of law under Federal Rule of Civil Furthermore, in reviewing the District
Procedure 50(b) that the jury verdict was Court’s ruling, we “must expose the
set aside and that the cause of action evidence to the strongest light favorable to
dismissed with prejudice. The District the party against whom the motion is made
Judge explained in her ruling that Dr. and give him the advantage of every fair
R aic zyk had not o ffered any and reasonable inference.” Dudley v. S.
documentation of the officer loans, Jersey Metal, Inc., 555 F.2d 96, 101 (3d
including when the loans would be paid Cir. 1977) (quoting Fireman’s Fund v.
back or if interest would accrue; she Videofreeze Corp., 540 F.2d 1171, 1178
concluded that there was not enough (3d Cir. 1976)).
evidence in the record to support existence III. Discussion
of the loans. The District Judge also ruled We must decide whether the
that even though the sales agreement may District Court was correct in concluding
have been unclear as to the final price of that there was not a minimum quantity of
the shares of stock, the April 17th closing evidence to support the jury’s verdict with
letter was unambiguous. Dr. Raiczyk’s respect to the sale of Dr. Raiczyk’s shares
argument that he had mistakenly signed and his claim of unpaid officer loans. As
the closing letter in a hurry did not qualify discussed more fully below, because the
for application of the doctrine of unilateral language of the closing statement is so
mistake and did not warrant reformation of clear, we conclude that the District Court
the contract. was correct in overturning the jury’s
Dr. Raiczyk appealed. verdict with respect to the sales amount.
II. Jurisdiction and Standard of Dr. Raiczyk should not be paid more than
Review the price listed in the closing statement.
Jurisdiction in the United States However, we find there is enough
District Court for the District of New evidence to support the verdict with
Jersey was based on 28 U.S.C. §1332. We respect to Dr. Raiczyk’s unpaid officer
have jurisdiction over the appeal pursuant loans and we will reverse on that issue.
to 28 U.S.C. §1291. A. The Purchase Price
Our review of a district court’s In the April 17, 1997, closing
grant of a judgment as a matter of law statement, the amount Dr. Raiczyk was to
under Fed.R.Civ.P. 50(b) is plenary. receive for his shares was clearly stated as
Trabal v. Wells Fargo Armored Serv. $206,975.21. Dr. Raiczyk initialed this
Corp., 269 F.3d 243, 249 (3d Cir. 2001). amount, initialed the net total on the
Such a judgment should only be granted if second page, signed the bottom of the two-
3
page document, and had the document Lowenschuss v. Resorts Int’l, Inc., 181
notarized. Dr. Raiczyk claimed that he F.3d 505, 512 (3d Cir. 1999) (requiring
made a mistake when he initialed and that the mistake must have occurred
signed this document, arguing that he did “notwithstanding the exercise of
so in a hurry, without the aid of a lawyer or reasonable care”) (quoting Intertech, 604
accountant. The jury was persuaded, and A.2d at 632). We see from the facts as
awarded him $113,431 in compensation stated above that Dr. Raicyzk’s mistake
for his shares. The District Court, does not rise to this very high standard.
however, ruled that Dr. Raiczyk did not Dr. Raiczyk cites a number of
satisfy his legal burden of establishing why contract bidding cases where rescission or
the contract should be reformed. The reformation based on unilateral mistake
court found that there was no evidence of was granted, but the harried and urgent
fraud and that Dr. Raiczyk’s mistake did nature of those situations is not present
not fall under the doctrine of unilateral here. For example, in Intertech, 604 A.2d
mistake. 628, the court did reform the contract due
When considering a document that to mistake, but that was only because the
is as clear as is the closing statement in office was short-staffed, the language in
this case, it is rare that such a document the contract was ambiguous, the bid had to
will be reformed by a court. First and be completed in a very short amount of
foremost, it is well settled that signing a time, and the head of the office, the mayor,
contract creates a “conclusive presumption had just died. None of these factors
that the signer read, understood, and parallels Dr. Raiczyk’s situation. In a less
assented to its terms.” Fleming Cos. Inc. extreme case, a court also granted
v. Thriftway Medford Lakes, Inc., 913 F. reformation in Cataldo Construction Co. v.
Supp. 837, 842-43 (D.N.J. 1995). If the County of Essex, 265 A.2d 842 (N.J.
terms of the contract are clear, a court’s Super. Ct. Ch. Div. 1970), where the only
interference could undermine the stability excuse was the time pressure of compiling
of contract negotiations. For that reason, a complex bid quickly. Id. at 846-47.
if one of the parties has made a mistake, However, Dr. Raiczyk was not in a similar
reformation is not automatically granted, time-pressured situation, despite his
but is available only at a court’s discretion. counsel’s dramatic remark that one of the
Intertech Assocs., Inc. v. City of Paterson, defendants “put a gun to his head.” As
604 A.2d 628, 631 (N.J. Super Ct. App. noted by the District Court in ruling on the
Div. 1992). The power of reformation post-trial motions, Dr. Raiczyk admitted
should be used only when the mistake is on the stand that he did not have to sign
material, when there would not be the settlement sheet for seven more days
prejudice to the other party (besides the and could have simply put off the closing.
loss of the bargain), and upon a showing In addition, unlike a company bidding for
that the plaintiff exercised reasonable care. a contract, Dr. Raiczyk did not have to
Fleming Cos. Inc., 913 F. Supp. at 843; make multiple calculations in a short
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amount of time. Dr. Raiczyk knew what invoked the parol evidence rule. Id. The
the amount should be, and all he had to do parol evidence rule is applicable only if we
was read the amount on the closing find as a matter of law that the integration
statement and see if it matched the amount clause clearly covers the officer loans.
with which he had previously agreed. We The loans are not mentioned anywhere in
will therefore affirm the District Court’s the sales agreement. Defendants argue
ruling setting aside the jury’s award with that, because the loans are not mentioned,
respect to the sale of Dr. Raiczyk’s shares. they should not be considered separately
from the sales agreement. Usually,
B. The Officer Loans however, when a contract does not
The District Court also set aside the mention a subject, it is because the
jury’s award of $22,500 to Dr. Raiczyk for contract was not meant to cover that
unpaid officer loans. The District Court subject. At the very least, a reasonable
ruled that the plaintiff “offered no jury could have found that the loans were
documentation of his own with respect to not meant to be included in the
the loan[s],” noting in particular that there computations of the sales agreement.
was nothing in the record to indicate Because the jury could reasonably
“when the money was to be paid back” or have held that the integration clause does
“whether there was interest on the loan.” not end the inquiry, we turn to the ruling of
Alternatively, the defendants also argued the District Court that there was no
in the District Court that the integration evidence in the record of when the loans
clause in the sales agreement clearly were to be repaid or at what interest rate.
covered the loans. Thus, even if the loans While this may be true, we know of no
did exist, they were included in the agreed authority under New Jersey law that voids
upon sales price for the shares. We a loan if it does not have these two
conclude, however, that the integration characteristics. An officer who lends
clause does not clearly cover the loans and money to a corporation has the same rights
that there is ample evidence in the record and obligations as any other person who
for a jury to find that Dr. Raiczyk is still lends it money. The fact that Dr. Raiczyk
owed these amounts. did not earn any interest on the loans does
We consider first the defendants’ not void them and, in fact, erases any
argument that the integration clause in the questions regarding the propriety of an
sales agreement precludes us from looking officer lending money to his corporation.
at other evidence in the record. Additionally, the fact that there is not a
Defendants rely on Filmlife, Inc. v. Mal document evidencing the loan does not
“Z” Ena, Inc., 598 A.2d 1234, 1235 (N.J. defeat Dr. Raiczyk’s case as the Statute of
Super. App. Div. 1991), to argue that, Frauds does not apply to such a loan. See
given the integration clause, non- N.J. Stat. § 25:1-5(f) (2003) (stating that
documentary evidence of the loans cannot only loans in excess of $100,000 and made
be considered. Filmlife, however, merely by a person whose business it is to extend
5
credit or loans fall under the Statute of Court with respect to the sale of the
Frauds). 1 In short, there is nothing wrong partnership interest, but we will reverse
with proving the existence of Dr. and remand the case with respect to the
Raiczyk’s officer loans through testimony unpaid officer loans with instructions to
and the corporation’s books, both of which reinstate the jury’s verdict of $22,500 for
were offered into evidence. the unpaid loans.
In light of the entire record in this
case, the jury had ample evidence to
conclude that the officer loans were due
Dr. Raiczyk. In his testimony, Dr. Raiczyk
specifically averred that he personally lent
$45,000 to Ocean County Veterinary
Hospital over a long period of time
beginning in 1992. Furthermore, he
testified that he paid taxes on those loans.
Dr. Raiczyk said unequivocally that he was
never repaid those amounts. He also
testified that they were bona fide loans and
not a result of creative bookkeeping.
Finally, Ocean Cou nty Veterinary
Hospital’s books and records were put into
evidence, which clearly showed the loans’
existence. This evidence certainly
surpasses the “minimum quantity of
evidence” necessary to uphold a jury
verdict on the issue. Trabal, 269 F.3d at
249. Therefore we will reverse the District
Court’s disallowance of recovery of these
loans and we will remand the case with
instructions to reinstate the $22,500 jury
award for the unpaid officer loans.
IV. Conclusion
For the reasons stated above we
will affirm the judgment of the District
1
Moreover, the Statute of Frauds is an
affirmative defense, and there is no
indication that it was pled or formed the
basis of the District Court’s decision.
6