Filed: Dec. 13, 1995
Latest Update: Mar. 02, 2020
Summary: Opinions of the United 1995 Decisions States Court of Appeals for the Third Circuit 12-13-1995 Compass Tech., INC. v. Tseng Lab., INC. Precedential or Non-Precedential: Docket 95-1060 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995 Recommended Citation "Compass Tech., INC. v. Tseng Lab., INC." (1995). 1995 Decisions. Paper 306. http://digitalcommons.law.villanova.edu/thirdcircuit_1995/306 This decision is brought to you for free and open access by t
Summary: Opinions of the United 1995 Decisions States Court of Appeals for the Third Circuit 12-13-1995 Compass Tech., INC. v. Tseng Lab., INC. Precedential or Non-Precedential: Docket 95-1060 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995 Recommended Citation "Compass Tech., INC. v. Tseng Lab., INC." (1995). 1995 Decisions. Paper 306. http://digitalcommons.law.villanova.edu/thirdcircuit_1995/306 This decision is brought to you for free and open access by th..
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Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
12-13-1995
Compass Tech., INC. v. Tseng Lab., INC.
Precedential or Non-Precedential:
Docket 95-1060
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995
Recommended Citation
"Compass Tech., INC. v. Tseng Lab., INC." (1995). 1995 Decisions. Paper 306.
http://digitalcommons.law.villanova.edu/thirdcircuit_1995/306
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________________________
NO. 95-1060
______________________________
COMPASS TECHNOLOGY, INC.,
Appellant
v.
TSENG LABORATORIES, INC.
WANG LABORATORIES, INC.
_________________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 93-cv-1934)
_________________
Argued October 16, 1995
Before: BECKER, ROTH, Circuit Judges, and
SHADUR,1 District Judge.
(Opinion filed December 13, l995)
_________________
F. Anthony Mooney, Esquire (Argued)
F. Anthony Mooney and Associates
20 Williams Street, Suite 110
Wellesley, MA 02181
Attorney for Appellant
Lisa D. Stern, Esquire (Argued)
Miller, Turetsky, Rule, McLennan & Stern
300 Courthouse Plaza
18 West Airy Street
Norristown, PA 19401-4717
Attorney for Appellee
1
Milton I. Shadur, United States District Judge for the Northern
District of Illinois, sitting by designation.
1
______________________
OPINION OF THE COURT
______________________
SHADUR, District Judge.
Compass Technology, Inc. ("Compass") appeals the district
court judgment, following a bench trial, that accepted the
position of defendant Tseng Laboratories, Inc. ("Tseng") in this
contract dispute. Compass contends that the district court erred
(1) by admitting extrinsic evidence to interpret the contract
between Compass and Tseng and (2) by refusing to reopen the
evidence after a key witness had first been located within a few
days after the close of the 1-1/2 day bench trial.
Jurisdiction in the district court was invoked on diversity-
of-citizenship grounds under 28 U.S.C. §1332 (originally-named
codefendant Wang Laboratories, Inc. ("Wang") was dismissed by the
district court for lack of jurisdiction). We have jurisdiction
over this appeal from the district court's final judgment under
28 U.S.C. §1291.
We hold that under any view of the evidentiary issues the
district court erred in refusing to hear the newly-located
witness. And because that alone requires us to reverse the
district court's judgment and remand for a new trial, we then
address the related evidentiary issues as a guide to the handling
of that second trial.
Factual Background
2
This dispute arises out of a "Manufacturer's Rep Agreement"
(the "Agreement") entered into between Tseng and Compass
effective February 19, 1988. Under the Agreement Compass was to
serve as the exclusive selling representative for Tseng, a
manufacturer of computer graphics chips, in six New England
states. In return Compass was to receive a commission on the
Tseng products sold by Compass within the six-state region.
Tseng's then Director of Sales and Marketing John Ciarlante
("Ciarlante") prepared the form of Manufacturer's Rep Agreement
based on his experience with a previous employer (Tseng not
having previously used such agreements). It took the form of a
standard printed document, with blanks left to be filled in as
appropriate. While the Agreement is quite straightforward in
most respects, its Paragraphs 3 and 4 give rise to the present
controversy:
3. PRODUCTS -- The Representative shall sell the
"products" of the manufacturer set forth herein which
may be changed by the Manufacturer upon sixty (60) days
prior notice, subject further to Addendum #1, attached
hereto:
4. AMOUNT OF COMPENSATION -- Representative's
compensation for services performed hereunder shall be
5%2 of the "net invoice price" defined herein below, of
the Manufacturer's product for which an order is taken
by Representative. However, when engineering,
execution of the order, or shipment involve different
territories the Manufacturer will split the full
commission among the Representatives whose territories
are involved. The Manufacturer will make this
determination and advise the interested Representatives
at the time the order is submitted to the Manufacturer.
2
This typed figure fills in a blank space in the printed form
Agreement.
3
No Addendum #1 is in the record, and that has proved to be
the focal point of the dispute between the parties. Even though
Tseng was unable to produce a copy of any such addendum or to
provide any witness who could testify to its claimed contents or
could even recall seeing one, it nonetheless says that there was
such an animal and that the addendum specified that Compass was
to receive no commission whatever on any sales of Tseng products
to Wang. For its part, Compass claims that no Addendum #1 ever
existed and that the Agreement is clear that Compass was to
receive a 5% commission on all sales within its territory,
including sales to Wang. What is at stake, if Compass is indeed
entitled to such a commission on sales to Wang during the time
that the Agreement was in effect, is an amount close to $200,000
exclusive of prejudgment interest.
Like most such catch phrases, the Chinese proverb that "One
picture is worth ten thousand words" is obviously not intended to
be taken literally as a universal rule. In this instance,
however, the relevant picture is of the words themselves--the
Agreement's pages showing its standardized form, the placement of
the blanks and the filling in of the blanks (or perhaps more
importantly, the failure to fill in the blanks)--and that picture
is worth a good many words in the context of this case. We have
therefore annexed a photocopy of the Agreement's most relevant
and most illustrative page, its page 1.
4
Ciarlante had been Tseng's sole participant in negotiating
and signing the Agreement on its behalf, while Compass was
represented by its President Donald Rheault ("Rheault"). At
trial Rheault testified that he could not recall whether or not
there was an Addendum #1 attached to the Agreement when he signed
it. Because Ciarlante could not be located by either party
before the trial, Tseng's only witness who spoke to the issue at
all was John Gibbons, a founder, director and business consultant
for Tseng, who testified that he had instructed Ciarlante to
exclude sales to Wang from the Agreement. But Gibbons admitted
on cross-examination that he did not actually see the Agreement
until March 1989--more than a year after it was executed and
delivered--and that he has never seen any Addendum #1.
Early in the trial the district court determined as a matter
of law that the Agreement's reference to the missing Addendum #1
created an ambiguity (1994 WL 446853, at *1). Over Compass'
objections the district court then allowed testimony about the
parties' intent as to what commission was to be paid on sales to
Wang.
Although the district court's comments during the short
bench trial had reflected a healthy skepticism as to whether
there had ever been an Addendum #1 (let alone what its terms were
if it actually existed), the court ultimately reached the
following conclusion (id. at *2):
On the basis of the credible evidence presented by the
parties the Court finds that Addendum #1 provided that
Compass would receive no commission on the sale of
Tseng Products to house accounts and that, at the time
the Agreement was executed, Tseng's only house account
5
was Wang. Compass knew and was aware that no
commission was to be paid on house accounts and that
Wang was Tseng's most substantial account and its only
house account. Compass knew and was aware of the fact
that a commission would not be paid on the Wang
account.
That holding was based, according to the district court, on three
strands of evidence presented at trial (id. at *2-3):
1. In addition to the stated awareness on Compass' part
reflected in the last two quoted sentences, Compass was
also aware that Tseng's previous manufacturer's
representative had been dismissed for requesting
commissions on the Wang account.3
2. Compass received two small commission statements for
periods during which substantial sales were made to
Wang, yet did not question Tseng or complain when those
statements did not cover those sales to Wang.
3. In November 1988 (six months after the contract became
effective) representatives of Compass and Tseng met to
discuss a commission for servicing the Wang account and
agreed that Compass would receive a 1% commission on
sales to Wang after December 1, 1988.
Based on those findings the district court included in the total
damages it awarded to Compass only 1% of the sales to Wang
3
Our examination of the record has disclosed no evidence whatever
to support this finding. As for the other findings by the
district court, both those quoted above and those summarized in
the text of this opinion, we make no effort to review either the
evidence tendered by Tseng or Compass' submission of point-by-
point evidence to the contrary, matters that we anticipate will
be re-evaluated by the district court in light of the Ciarlante
testimony and of what is said in this opinion.
6
between December 1, 1988 and May 24, 1989 (that figure came to
$18,402) plus prejudgment interest (id. at *3).4
On August 16, 1994--after the trial had ended on August 11
but before the judge's August 15 decision was docketed and sent
to the parties on August 18--Compass' efforts to locate
Ciarlante, launched some months earlier, bore fruit. Its counsel
immediately filed a Motion To Stay Issuance of Decision, or
Vacate Decision, and Re-Open Evidence to Permit the Testimony of
Previously Missing Witness.5 Then on August 22, after it had
received the district court's decision, Compass filed a second
motion--its Motion To Alter or Amend Judgment, or, Alternatively
for New Trial, or Re-Opening of the Evidence--under Fed.R.Civ.P
("Rule") 59(a). Compass then supported that motion with an
affidavit from Ciarlante in which he stated what his testimony,
if it were credited at all, would be if the Court reopened the
evidence and allowed him to testify.
Suffice it to say at this point that Ciarlante's testimony,
if it were credited at all, would have been devastating to
Tseng's position. Among other sworn assertions that supported
Compass' position in its entirety, Ciarlante flatly controverted
Gibbons' testimony as to any discussions having taken place about
Wang sales being noncommissionable (or being commissionable at a
4
As reflected in the text, December 1, 1988 was the date on which
the district court found that Tseng agreed to begin paying
Compass a 1% commission on Wang sales. As for the May 24, 1989
date, that came from the fact that Tseng notified Compass of the
Agreement's termination on April 24, 1989, and Agreement ¶9
called for any such termination to be effective 30 days later.
5
Because of a mix-up in filing, that motion was not docketed
until September 12, 1994.
7
reduced rate) and just as flatly negated the existence of the
mysterious Addendum #1:
29. It was in this context that the manufacturers
representative agreement with Compass Technology, Inc.,
a copy of which is attached hereto as Exhibit C, was
entered into in February of 1989.
30. I prepared that contract and I dealt exclusively
with Mr. Rheault in connection with its execution.
31. There was never an Addendum #1 attached to the
contract, nor was it ever intended that there would be
an Addendum #1 attached to the contract.
32. It was never the intent on the part of either
Tseng or Compass that commissions on sales to Wang
would be excluded from the contract or would be treated
as subject to a reduced commission.
33. One of Compass' responsibilities was to salvage
the Wang account and develop the Wang business. Under
those circumstances, it would have made no sense for
Tseng to require that there be no commission paid on
Wang sales through Compass Technology, Inc. or that
there be a reduction of any commission earned on those
sales.
34. There were never any discussions within Tseng
Laboratories, Inc. that there would be no commissions
paid to Compass with respect to Wang sales and I was
not instructed to include such a provision, or a
provision calling for reduced commissions, in any
contract, addendum or other arrangement entered into
with Compass Technology, Inc. on behalf of Wang.
35. I was never told that any manufacturers rep
agreement I entered into on behalf of Tseng would have
to be approved, initialed or countersigned by anyone,
including John Gibbons or Jack Tseng.
36. The form of agreement used in connection with the
Compass Technology, Inc. contract was one I used while
employed at Princeton Graphics and that form of
agreement provided for an Addendum #1, which was
occasionally used by Princeton Graphics to exclude
certain products, not to list house accounts.
8
37. I have never seen an Addendum #1 in connection
with the Compass agreement or any other manufacturers
rep agreement entered into during my tenure at Tseng.
38. I was present at the breakfast meeting which took place
on November 2, 1988 at which John Gibbons and Donald Rheault
were present.
39. I did not meet with Donald Rheault the night before
that meeting to advise him that Compass Technology, Inc.
would now be receiving a 1% commission on Wang sales, and I
was not instructed by anyone at Tseng to have any such
conversation with Mr. Rheault.
40. Had such an instruction been given to me, I would
remember it, because it would have been directly contrary to
the arrangement which Tseng had with Compass Technology,
Inc. for the payment of a 5% commission on sales in Compass'
New England territory, and it would have represented a
drastic change in what had been agreed upon, namely, that
Compass would receive a full commission on all sales in its
territory.
41. There was no conversation at the breakfast meeting on
November 2 in which Donald Rheault thanked John Gibbons for
allowing Compass Technology, Inc. a 1% commission. Again, I
would have a definite recollection of any such comment
because it would have been inconsistent with what I knew to
be the arrangement between Compass Technology, Inc. and
Tseng, namely, that Compass was to receive a 5% commission
on all sales in its territory, including sales to Wang. The
breakfast meeting was to discuss protocol and the agenda of
a meeting scheduled to take place at Wang immediately
following breakfast.
On December 20, 1994 the district court denied both of
Compass' motions, finding that Ciarlante could have been located
earlier had Compass exercised "reasonable diligence," that
Ciarlante's testimony about Addendum #1 would be "merely
cumulative" and that at any rate his testimony would not change
the outcome (1994 WL 719616). That decision tied up the last
loose ends before the district court and set the stage for this
appeal.
9
Refusal To Reopen Judgment
We begin where the factual account has just ended--with the
district court's rejection of Compass' motion, brought under this
portion of Rule 59(a):
A new trial may be granted to all or any of the parties
and on all or part of the issues . . . in an action
tried without a jury, for any of the reasons for which
rehearings have heretofore been granted in suits in
equity in the courts of the United States.
Although that provision does not in terms speak of such relief
being based on new evidence, Rule 60(b)(2) provides that "newly
discovered evidence which by due diligence could not have been
discovered in time to move for a new trial" can give rise to
relief from a judgment or order. Rule 59 and Rule 60(b)(2) share
the same standard for granting relief on the basis of newly
discovered evidence (11 Charles Wright, Arthur Miller and Mary
Kay Kane, Federal Practice and Procedure: Civil 2d § 2808, at 86
(2d ed. 1995).
That standard requires that the new evidence (1) be material
and not merely cumulative, (2) could not have been discovered
before trial through the exercise of reasonable diligence and (3)
would probably have changed the outcome of the trial (Bohus v.
Beloff, 950 F.2d 919, 930 (3d Cir. 1991)). Any party requesting
such relief "bears a heavy burden" (id., quoting Pilsco v. Union
R. Co.,
379 F.2d 15, 17 (3d Cir. 1967)). Though we consequently
review a district court's decision in that respect for an abuse
of discretion (cf. Olefins Trading, Inc. v. Han Yang Chem Corp.,
9 F.3d 282, 290 (3d Cir. 1993), dealing with the other side of
10
the coin--the erroneous admission of evidence), in this instance
we hold that the district court did indeed abuse its discretion
by refusing to reopen the evidence to allow Ciarlante to testify.
First, the district court held that Compass could have
located Ciarlante had it exercised "reasonable diligence." But
that determination gives insufficient credence to the affidavit
of Compass' counsel F. Anthony Mooney ("Mooney") that accompanied
its motion. Mooney there chronicled Compass' continuing efforts
to locate Ciarlante, which began as soon as Mooney learned
through discovery in the case about the vital position of
Ciarlante as Tseng's only participant in the negotiations with
Compass that resulted in the Agreement (as well as Ciarlante's
having been Tseng's signatory to the Agreement).
Indeed, it is plain that both sides were searching for
Ciarlante as a possible witness: When Tseng's counsel was asked
by the district court about his whereabouts, she replied, "Heaven
only knows. Neither party has found him." Based on Compass'
counsel's pursuit of several possible avenues to trace
Ciarlante's whereabouts, on counsel's ultimate success in
locating him through the lawyer who represented Ciarlante in his
lawsuit against Tseng (with whom Ciarlante had a falling out),
and on counsel's immediate request to the district court to
reopen proofs (before counsel knew that the judge had issued his
written ruling a day earlier), it must be concluded that Compass
made the appropriate showing of diligence.6
6
One matter that the district judge mentioned in ruling otherwise
was that Compass had twice (on July 27 and August 5, 1994)
11
More critically for Rule 59 purposes, the district court's
characterization of Ciarlante's proposed testimony as "merely
cumulative" is unacceptable. That surprising label was ascribed
to Ciarlante's affidavit because Rheault had testified that there
was no Addendum #1 that excluded products sold to Wang. But it
is plainly different in both degree and kind to have such
testimony emanating from the sole representative of Tseng in the
negotiation and signing of the Agreement. Moreover, Ciarlante's
affidavit expressly contradicts the testimony of Tseng's witness
(Gibbons), who had said that such an exclusion of Wang sales had
been intended, and other previously-quoted portions of the
affidavit (its Paragraphs 38-41) are also wholly at odds with
Gibbons' testimony as to the asserted post-contract negotiation
of a lower commission rate on Wang sales.
We do not of course rule on which witness or witnesses are
ultimately to be credited--that is a matter for the district
court to decide on remand. But the point at this stage of the
proceedings is that if Ciarlante's testimony were to be believed
in any material respect, it could not fairly be viewed as "merely
cumulative." One thing should be added in that regard,
occasioned by the district court's comment (just after another
use of the term "merely cumulative") that Tseng would challenge
Ciarlante's credibility because he had been terminated by Tseng
opposed Tseng's requests to continue the trial date because
Tseng's key witness was scheduled to be out of the country.
Whatever else might be said on that score, of course it would be
inappropriate to turn down Compass' motion as some sort of
penalty for its not having consented to Tseng's request for a
continuance.
12
and had later sued it for wrongful discharge. Just as this court
does not make credibility determinations as to witnesses whom we
have not seen and heard (else we might review district court
credibility findings de novo, rather than according them the
respect that we do), so it would be improper for the district
court to consider discrediting Ciarlante sight unseen.
Lastly in Rule 59(a) terms, the district court ruled that
Ciarlante's testimony would not change the outcome of the trial.
But that is closely linked to the point we have just made. At a
minimum such a determination cannot be made without the prior--
and impermissible--determination that Ciarlante would be
disbelieved without ever seeing and hearing him testify. Indeed,
even on that premise it cannot safely be said that the prior
trial outcome should stand in any event--and that is so for other
reasons to be discussed in the next section.
Our conclusion is additionally fortified by the posture of
the case before the district court. What we have said would call
for the granting even of a conventional Rule 59(a) (or Rule
60(b)(2)) motion for a new trial. But that result obtains a
fortiori where what had taken place here was a short bench trial,
with the district court facing only the need to reassemble
counsel (and their clients, if they desired) to hear Ciarlante
out through direct and cross-examination, and with no need to
recall the other witnesses to testify anew (except perhaps to
amplify their testimony in light of Ciarlante's)--let alone any
need to reconvene with a new jury for a full-blown rerun, as a
new trial most often requires.
13
In sum, a new trial must be ordered because of the district
court's erroneous ruling on Compass' Rule 59(a) motion. That
conclusion logically leads to a brief discussion of some of the
evidentiary ground rules for that new trial, as called into
question by this appeal.
Evidence and Burden of Proof
Both before the district court and before us, the litigants
have focused their principal fire on issues of parol evidence:
whether under Pennsylvania law (which is specified by Agreement
¶12 to provide the rules of decision, a designation that both
parties to this diversity-of-citizenship action have honored) it
is proper to resort to matters outside of the Agreement itself
that assertedly bear on the intent of the contracting parties.
Analysis demonstrates that another aspect of Pennsylvania law
calls for those issues to be scrutinized in conjunction with
considering what constitutes the appropriate level of proof on
the evidentiary issues.
It is of course familiar and noncontroversial doctrine that
the fundamental object in interpreting a contract is to ascertain
the intent of the parties (Z&L Lumber Co. of Atlasburg v.
Nordquist, 348 Pa. Super. 580, 585,
502 A.2d 697, 699 (1985). And
if their intent can be cleanly extracted from the clear and
unambiguous words that the parties have used, it is equally
conventional wisdom that they are held to those words contained
in the contract (Mellon Bank, N.A. v. Aetna Business Credit,
619
F.2d 1001, 1013 (3d Cir. 1980)). Those clear waters become
murkier when an issue is raised as to a lack of clarity or a
14
claimed ambiguity in the contractual language--in that event the
court "should hear the evidence presented by both parties and
then decide whether `there is objective indicia that, from the
linguistic reference point of the parties, the terms of the
contract are susceptible of different meanings'" (Z&L Lumber, 348
Pa. Super. at 586, 502 A.D. at 700, quoting Mellon
Bank, 619 F.2d
at 1011). In doing so the court must consider the words of the
contract, the alternative meaning proffered by the challenging
party, and the nature of the evidence that party could provide
(Mellon
Bank, 619 F.2d at 1011). It is up to the party claiming
that an ambiguity exists to show that a contract (Metzger v.
Clifford Realty Corp.,
327 Pa. Super. 377, 388,
476 A.2d 1
(1984):
is reasonably or fairly susceptible of different
constructions and is capable of being understood in
more senses than one and is obscure in meaning through
indefiniteness of expression or has a double meaning.
In this instance, Agreement ¶11 contains the conventional
integration clause prohibiting resort to other discussions and
agreements between the parties:
GENERAL -- This Agreement contains the entire
understanding of the parties, shall supersede any other
oral or written agreements, and shall be binding upon
and inure to the benefit of the parties' successors and
assigns. It may not be modified in any way without the
written consent of both parties.
Nonetheless the Agreement itself poses an obvious question on its
face: Does the reference in Paragraph 3 of the standard form
Agreement to "Addendum #1, attached hereto" match up with an
actual document, or is it simply a part of that standard form
15
that has no real significance (in somewhat the same way that, for
example, a printed standard form of real estate contract may
often contain a boilerplate reference "See also rider(s)
attached" whether or not a particular contract has any riders at
all)? And that basic question subsumes a whole set of such
subsidiary questions as:
Is it likely that if an Addendum #1--containing a special
provision as to Tseng's single largest account
(Wang)--had in fact existed and had been
"attached," neither contracting party would have
anywhere in its possession any Agreement other than
the version that was wholly lacking in any Addendum
#1 or any other attachment?
Is it likely that if an Addendum #1 had in fact existed, it
would have contained a provision dealing, not
with some exception to Tseng's "products" that were
to be sold by Compass ("products" are, after all,
the subject to which the reference to any such
addendum in Agreement ¶3 relates), but rather with
a claimed exception to the totality of Tseng's
customers to whom commissionable sales were to be
made?
In the same respect, is it likely that if an Addendum #1 had
in fact existed, no further explanatory
reference to the subject matter of that addendum
would have been inserted in the space following the
16
colon in Agreement #3, rather than the parties
having left that space totally blank?
As a variant on those last two questions, is it likely
that if an Addendum #1 had in fact existed, and
had dealt with an exception to the flat 5%
commission rate prescribed in Agreement ¶4, no
exception to that rate (or at least no cross-
reference to Addendum #1) would have been referred
to in the Agreement's blank space that immediately
followed that printed Agreement ¶4?
There may be other questions that bear on the issue, and we
do not suggest the answers to any of them (again that is
something for the trier of fact)--but clearly all of those
matters call for the district court to do more than to limit
itself in terms of the sometime arcane questions of what
separates "patent" from "latent" ambiguities (see Metzger, 327
Penn. Super. at 386, 476 A.2d at 5) or of what constitutes an
"internal" as contrasted with an "external" ambiguity. Certainly
the potential tyranny of such labels made it appropriate for the
district court to have considered the testimony of Gibbons as to
the alleged content of a meeting between the parties that took
place well after the Agreement was entered into. And with that
testimony before the trier of fact, it was just as plainly
necessary for the district court to consider the testimony of
Ciarlante that directly challenged Gibbons' statement as to the
holding of any meeting having the content to which Gibbons
testified.
17
But to return to the point of beginning, the central focus
of the parties' dispute is clearly on the question whether or not
Addendum #1 truly existed--a question that bears not only on the
meaning of the Agreement to begin with but also on whether the
testimony of Gibbons or Ciarlante as to the claimed post-
Agreement negotiation is to be credited. Because Tseng bears the
burden of proving the existence of an ambiguity (under Metzger
and like cases), and because it hangs its ambiguity argument on
an addendum that the parties do not agree even exists and that
Tseng cannot produce, this case bears a substantial resemblance
to the "lost instrument" issue that arises from time to time in
contract cases. And in that context the Pennsylvania courts have
imposed a stringent standard of proof on the party that seeks to
rely on a document that it cannot produce.
Thus the plaintiff in Hacker v. Price, 166 Pa. Super. 404,
407,
71 A.2d 851, 853 (1950) claimed that a written agreement
gave him the right to purchase three shares of stock. Although
the original Agreement was lost, plaintiff was allowed to
introduce secondary evidence to show the content of the agreement
and was ultimately successful in forcing specific performance. In
affirming that decision, the Pennsylvania Superior Court set out
the following requirements for recovering on a lost instrument
(id., citations omitted):
To recover on an instrument, the original of which has
been lost, the burden of proving the loss of the
original and that a diligent, bona fide and thorough
search was made without success is upon the one
offering secondary evidence. He is also required to
prove its former existence, execution, delivery and
contents. The evidence to sustain these averments must
18
be clear and convincing. Whether the party offering
secondary evidence has met this burden of proof
successfully is a matter to be determined by the trial
Court and rests largely in the Court's discretion which
will not be disturbed on appeal unless there is a
manifest abuse thereof.
That "clear and convincing evidence" requirement echoes
established Pennsylvania doctrine. See, e.g., Mahoney v.
Collman, 293 Pa. 478, 482,
143 A. 186, 187 (1928) (imposing a
"very heavy burden" on the party seeking to rely on a lost
instrument, as well as announcing the "clear and convincing"
evidentiary standard); In re Greggerson's Estate
344 Pa. Super.
498, 500-01,
25 A.2d 711, 713 (1942) (following Mahoney).
We recognize of course that those Pennsylvania cases have
dealt with the "lost instrument" approach in a somewhat different
context, applying it to plaintiffs who attempt to recover on such
a missing document, rather than to a defendant who needs to prove
such a document to satisfy its burden of establishing an
ambiguity (in that respect only Haagen v. Patton, 193 Pa. Super.
186, 190,
164 A.2d 33, 34-35 (1960) is factually parallel to this
case, and that opinion had no occasion to discuss the required
standard of proof). Accordingly we do not opine on the level of
proof to be applied by the district court on remand. Instead we
leave it to that court to determine in the first instance whether
the same considerations that have called for the higher "clear
and convincing" standard of proof in the Pennsylvania "lost
document" cases apply with like force to the situation involved
in this case.
Conclusion
19
On remand, then, the district court is required to hear and
consider the testimony of Ciarlante as to all of the matters
dealt with in his affidavit. And in the district court's
reconsideration of all of the evidence in light of that
testimony, it should give consideration to whether Tseng's burden
of proving:
1. that Addendum #1 existed;
2. that the claimed addendum could not be found after
a bona fide search; and
3. that Addendum #1 excluded sales to Wang from the
across-the-board 5% commission provision set out in
Agreement ¶4;
should be scrutinized through a more demanding "clear and
convincing evidence" lens. We reverse and remand the case for
proceedings consistent with this opinion.
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