860 F2d 1089 Harrison v. Happy Day Ford

860 F.2d 1089

Unpublished Disposition

NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.

Susan E. HARRISON, Plaintiff-Appellant,
HAPPY DAY FORD, Defendant-Appellee.

No. 87-3911.

United States Court of Appeals, Ninth Circuit.

DECIDED Sept. 30, 1988.

Before POOLE, CANBY and LEAVY, Circuit Judges.

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In this diversity case, plaintiff-appellant Susan E. Harrison appeals from the order of the district court granting defendant-appellee Happy Day Ford's (HDF) motion for judgment notwithstanding the verdict (JNOV) and dismissing her complaint with prejudice. The jury returned a verdict against HDF for breach of an oral contract to provide temporary insurance and for negligently misrepresenting the existence of insurance coverage. The motion was granted on the grounds that (1) the contract was fatally indefinite as to subject matter, a material term; (2) the parol evidence rule barred proof of the oral promise; and (3) assuming arguendo that negligent misrepresentation is a cognizable cause of action in Idaho, proof of the misrepresentation was also barred by operation of the parol evidence rule. We affirm without reaching the question of definiteness.


We review the grant of a motion for JNOV de novo. JNOV is appropriate if the evidence permits but one reasonable conclusion--the one rejected by the jury. The evidence is examined in the light most favorable to the non-moving party to determine whether the record contains substantial evidence to support the verdict. Locricchio v. Legal Services Corp., 833 F.2d 1352, 1356 (9th Cir.1987). The district court's determinations of state law are also reviewed de novo. Cunha v. Ward Foods, Inc., 804 F.2d 1418, 1423 (9th Cir.1986). We may affirm the district court on any basis supported by the record. City of Las Vegas v. Clark County, 755 F.2d 697, 701 (9th Cir.1985).


The evidence is summarized here in the light most favorable to Harrison. Harrison obtained a judgment against Dean Evans on her claim for physical injuries caused by his negligent operation of a vehicle, in which she was a passenger. Evans was judgment-proof; he therefore assigned to Harrison his claim against HDF stemming from its failure to provide insurance coverage.


Evans' claim was based on HDF's alleged oral promise to provide temporary liability insurance in consideration of his purchase of the vehicle, and its representation that he was covered by HDF's liability policy when he drove it away after completing the transaction. He purchased the vehicle at HDF's lot in Idaho, paying $1000 down and signing a Retail Installment Contract (the contract) to finance the remainder through BarclaysAmerican.1


The front page of the contract provided, in large bold letters:



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The sale was negotiated by HDF employees Dale Nordstrom, salesman, and John McCain, sales manager. During the negotiations, Evans and McCain discussed liability insurance. McCain advised that Evans' existing policy would cover him immediately. Evans explained that he was only insured against property damage on his other, stored vehicle. He therefore requested that HDF provide him with a temporary insurance binder to cover him for seven days until he could obtain liability insurance through his agent in Oregon. McCain agreed, stating that when Nordstrom placed a sticker in the vehicle window, he would be covered for seven days. Nordstrom placed the sticker in the window, Evans relied upon the representation of coverage, and he drove away. The sticker was actually a seven day registration permit. The accident occurred three days later. Evans then called HDF to determine the number of its policy and was told by McCain that he was not covered.2 Upon learning of the destruction of its collateral, BarclaysAmerican rejected the financing agreement. HDF then called Evans and demanded he return and reapply for credit by filling out another contract. Evans refused, citing HDF's failure to provide coverage.


The jury returned a verdict for Harrison on her claims for breach of oral contract and negligent misrepresentation and the court entered judgment accordingly. HDF then successfully moved for JNOV and Harrison timely appealed.


I. Contract claim.

Idaho Code section 28-2-202 provides:


Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein, may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement, but may be explained or supplemented:


(a) by course of dealing or usage of trade (Sec. 28-1-205) or by course of performance (Sec. 28-2-208); and


(b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.

The Idaho Supreme Court has stated that


when a contract has been reduced to writing, which the parties intend to be a complete statement of their agreement, any other written or oral agreements or understandings ... made prior to or contemporaneously with the written "contract" and which relate to the same subject matter are not admissible to vary, contradict or enlarge the terms of the written contract.


Chapman v. Haney Seed Co., 102 Idaho 26, 624 P.2d 408, 410 (1981).


The threshold question is whether the contract, which disclaims the provision of any liability coverage, was an integration--the complete and final statement of the parties agreement on the subject. The answer "depends on the intent of the parties, revealed by their conduct and language, and by the surrounding circumstances. Mere existence of a document does not establish integration." Nysingh v. Warren, 94 Idaho 384, 488 P.2d 355, 356 (1971) (footnote omitted). If the document contains a merger clause, however, it raises a rebuttable presumption of integration. Anderson & Nafziger v. G.T. Newcomb Co., 100 Idaho 175, 595 P.2d 709, 714 (1979). See also Tusch Enters. v. Coffin, 113 Idaho 37, 740 P.2d 1022, 1029 (1987) (merger clause "is one means of proving that the writing was intended as a complete statement of the parties' agreement").


The contract contains a merger clause. The second page of the document states that "NO CHANGE IN THIS CONTRACT SHALL BE BINDING UNLESS IN WRITING AND NO AGREEMENT, REPRESENTATION OR WARRANTY SHALL BE BINDING ON YOU UNLESS EXPRESSLY CONTAINED HEREIN. Therefore, a rebuttable presumption of merger arose which, in the absence of substantial contrary evidence, becomes conclusive. Our review of the record reveals no substantial evidence that the parties did not intend the contract to be the embodiment of their complete and final expression on the subject of the provision of liability insurance. See Nysingh, 488 P.2d at 356. Therefore, the jury could not properly find that the contract was not an integration.3


The question thus becomes whether the terms of the alleged oral agreement are inconsistent with those of the contract. We think it self-evident that "insurance against liability for bodily injury or property damage to others is not included in this transaction" is inconsistent with a promise to include insurance against liability in the transaction. We conclude that the evidence admits of no conclusion other than that the parties intended the contract to be the final expression of their agreement as to liability insurance coverage, and that the terms of the alleged oral promise contradict those in the contract. We therefore hold that proof of the oral agreement was barred by the parol evidence rule. We affirm the grant of JNOV as to Harrison's contract claim.


II. Tort claim.


The trial court granted JNOV on the claim for negligent misrepresentation on the ground that, assuming arguendo the existence of such a cause of action in Idaho,4 the parol evidence rule barred proof of any negligent promissory misrepresentations. We make that same assumption here, and we reach the same conclusion.


In discharging its Erie obligation to ascertain and apply state substantive law, the district court is ordinarily bound by the decisions and dicta of the highest state court on the question. Dimidowich v. Bell & Howell, 803 F.2d 1473, 1482 (9th Cir.1986). Where, as here, the state court of last resort has offered no guidance, the district court must look to other sources, including published opinions from other jurisdictions. Cunha, 804 F.2d at 1424; Dimidowich, 803 F.2d at 1482. The district court failed to explain the basis for its conclusion that Idaho would apply the parol evidence rule to a claim for negligent misrepresentation. Again, however, we agree with the court's conclusion and affirm nevertheless.


The question whether the parol evidence rule can operate to bar proof of a promissory misrepresentation is a source of considerable division among the states. Compare Geosearch, Inc. v. Howell Petroleum Corp., 819 F.2d 521, 525-26 (5th Cir.1987) (Texas law) (by implication); APLications, Inc. v. Hewlett-Packard Co., 501 F.Supp. 129, 134, 136 (S.D.N.Y.1980), aff'd 672 F.2d 1076 (2d Cir.1982) (California and New York law); Formento v. Encanto Business Park, 154 Ariz. 495, 744 P.2d 22, 25-26 (Ct.App.1987); Hill v. Jones, 151 Ariz. 81, 725 P.2d 1115, 1117-20 (Ct.App.1986); Martens Chevrolet, Inc. v. Seney, 292 Md. 328, 439 A.2d 534, 539-40 n. 7 (1982); Brown v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 197 Mont. 1, 640 P.2d 453, 456-57 (1982); Brungard v. Caprice Records, Inc., 608 S.W.2d 585, 588 (Tenn.Ct.App.1980); Haynes v. Cumberland Builders, Inc., 546 S.W.2d 228, 231 (Tenn.Ct.App.1976) (parol evidence rule has no application to tort claim for negligent misrepresentation) with Isler v. Texas Oil & Gas Corp., 749 F.2d 22, 23-24 (10th Cir.1984) (New Mexico law); United States Welding, Inc. v. Burroughs Corp., 640 F.Supp. 350, 351-53 (D.Colo.1985); Continental Cas. Co. v. National Steel Corp., 533 F.Supp. 369, 375 (W.D.Pa.), aff'd mem. 692 F.2d 748 (3d Cir.1982); Kalil Bottling Co. v. Burroughs Corp., 127 Ariz. 278, 619 P.2d 1055, 1058 (Ct.App.1980); Rio Grande Jewelers Supply, Inc. v. Data General Corp., 101 N.M. 798, 689 P.2d 1269, 1270-71 (1984); Wilkinson v. Carpenter, 276 Or. 311, 554 P.2d 512, 514-16 (1976) (refusing to permit circumvention of the parol evidence when plaintiffs had not shown fraudulent misrepresentation).


We believe that, on these facts, the Idaho Supreme Court would apply the parol evidence rule to bar proof of the alleged oral promise to provide insurance on Harrison's tort theory as well. We find most persuasive the view that the parol evidence rule precludes consideration of any evidence of an oral promise inconsistent with the express terms of an integration, regardless of whether the claim is styled one of tort or contract. The contrary view exalts form over substance and permits easy circumvention of the rule. See Rio Grande Jewelers Supply, Inc., 689 P.2d at 1271 ("Under these circumstances, [the] claim for negligent misrepresentation can be nothing more than an attempt to circumvent the operation of the Commercial Code and to allow the contract to be rewritten under the guise of an alleged action in tort."). Accord Isler, 749 F.2d at 23-24; United States Welding, Inc., 640 F.Supp. at 351-53. The Idaho Supreme Court has expressed a strong policy against rewriting the terms of an unambiguous contract. See, e.g., Galaxy Outdoor Advertising, Inc. v. Idaho Transp. Dep't, 109 Idaho 692, 710 P.2d 602, 605, 606 (1985). Moreover, the presence of an integrated agreement precludes any right to rely on an inconsistent promise. See Continental Cas. Co., 533 F.Supp. at 375.5 We do not believe the Idaho Supreme Court would encourage the frustration of the Idaho legislature's expressed intent to protect the freedom of contract by permitting a collateral attack on the contract through an action in tort. Nor do we believe it would permit a jury to endorse as reasonable a promisee's reliance on a promise inconsistent with the express terms of its written agreement.6


We conclude that the district court properly granted HDF's motion for JNOV. The Idaho Supreme Court would probably hold the parol evidence rule applicable and bar proof of both the contract and tort claims.



CANBY, Circuit Judge, dissenting:


I would direct that judgment be entered in accordance with the verdict of the jury. As the majority correctly concludes, the parol evidence rule does not apply unless the parties intended their written contract to be a complete and final statement of their agreement. Idaho Code Sec. 28-2-202; Chapman v. Haney Seed Co., 102 Idaho 26, 624 P.2d 408, 410 (1981). This question concerning the parties' intent would normally be for the trial judge to resolve, but in this case it was submitted to the jury without objection to that procedure. Substantial evidence supports the jury's implicit finding that the parties did not intend the writing to be the total embodiment of their agreement.


I disagree that the clause in the Retail Instalment Contract gives rise to a presumption of integration. The clause appears on a page of the Contract that deals with only two subjects. The first, Notice of Proposed Credit Life and Credit Accident and Health Insurance, appears in a separate box. There then follows a section entitled "Security Agreement." The first, unnumbered paragraph of that section grants a purchase money security interest in the vehicle, its equipment, and any proceeds of property or credit insurance on it. It then states:


I understand the following conditions apply with respect to your security interest:


* * *


* * *


6. No change in this contract shall be binding unless in writing and no agreement, representation or warranty shall be binding on you unless expressly contained herein.


(Emphasis added.) The introductory language makes clear to me that the "integration" clause of paragraph number 6 cannot be applicable to the contract as a whole; it simply means that changes or representations concerning the security interest must be in writing. Thus, no presumption of integration of the entire transaction applies.


In determining integration, we must focus on the intent of the parties themselves, not on what some objective "reasonable person" would have believed. Interform Co. v. Mitchell, 575 F.2d 1270, 1277-78 (9th Cir.1978) (applying Idaho Code Sec. 28-2-202). Here, there was evidence from which the jury could find no intent that the writing embody the entire agreement. In the first place, there were several writings. In addition to the Retail Instalment Contract, there were: an Agreement to Provide Insurance (which, in plaintiffs' view, meant an agreement to provide it within seven days), a Purchase Order, an Odometer Mileage Statement, a Credit Life Insurance Agreement, a Certificate of Title, an Application for Title, and a seven-day windshield license sticker. The Purchase Order contained a clause stating that it "comprises the complete and exclusive statement of the terms of the agreement relating to the subject matters covered hereby." That was clearly not true, as one of defendant's witnesses acknowledged; the Purchase Order did not include the terms of financing.


Of all of these documents, only the Retail Instalment Contract contained a clause stating that liability insurance was not included in "this transaction." This clause could easily be believed to mean that the Retail Instalment Agreement itself provided no liability insurance, or that Barclay's, whose form it was, provided no liability insurance. The sales and financing transaction was fractionated into many segments, spread over several documents. A salesman's oral promise to provide liability insurance coverage for seven days could reasonably be viewed by the parties to the agreement as yet another separate subject, covered by oral agreement rather than writing. The fact that the insured, after the accident, called the defendant Happy Day Ford to find out who carried their insurance, lends support to that view. In sum, there is enough here to support the jury's verdict. I would reinstate it, and order judgment to be entered accordingly.


This dispositon is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3


Evans also signed a number of other documents, including an agreement to purchase physical damage insurance on the vehicle, a purchase agreement, an odometer mileage statement, a credit life insurance policy, and an application for title. None of these is relevant here


Evans testified that he had read and understood the contract's liability insurance disclaimer, but that he understood it to be superseded by HDF's provision of temporary coverage


The district court concluded that the parole evidence rule applied because the terms of the alleged oral agreement contradicted those in the contract. Under Idaho law, the inconsistency of the terms becomes a basis for exclusion only once an integration is found. See Interform Co. v. Mitchell, 575 F.2d 1270, 1276-78 (9th Cir.1978). However, the record compels the conclusion that there was an integration and, as noted, it is the result and not the reasoning which we review. City of Las Vegas, 755 F.2d at 701


The Idaho Supreme Court has expressly declined to consider whether negligent misrepresentation is a viable theory in Idaho. See Stewart Title of Idaho, Inc. v. Nampa Land Title Co., 110 Idaho 330, 715 P.2d 1000, 1003 (1986)


We stress that we deal here with a claim based on a negligent promissory representation. We need not and do not address the question whether the Idaho Supreme Court would apply the bar of the parol evidence rule to a negligence claim based on a non-promissory assertion of fact


We find it significant that this is the position taken by the Oregon courts. See Wilkinson v. Carpenter, 554 P.2d 512. In the absence of an Idaho decision on point, our practice is to "assume that an Idaho Court would look to the decisions of its sister state, Oregon." Yost v. Morrow, 262 F.2d 826, 828 n. 3 (9th Cir.1959)