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Precedential or Non-Precedential: Precedential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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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

4

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