Opinion
September 5, 1985.
Present: Doyle, P.J., Forte Jodrey, JJ.
Contract, Distributorship agreement; Individual guaranty; Parol evidence rule. Practice, Civil, Findings; Dist./Mun. Cts. R. Civ. P., Rule 64
Report of court's vacation of finding for defendant Dowd and remand for new trial. Action heard in the Marlborough Division by Delmonte, J.
Jordan Shapiro for the plaintiff.
James Long for defendant Paul Dowd.
This is an action in contract wherein Encon, a Texas corporation, seeks to recover on a distributor agreement with Heritage and on an individual guaranty signed by Dowd. The court found for the plaintiff as against Heritage in the amount of $28,683.73, and found for the defendant Dowd. It is the latter result upon which the plaintiff appeals.
There was evidence that Dowd, while general manager of New England Ceiling Fan, entered into discussion with Encon to start his own business as a distributor for Encon. After discussions with Encon, Dowd left New England Ceiling Fan and started his own business under the style Heritage Distributors, Dowd's discussions culminated on August 1, 1980 in the Distributor Agreement being signed by the parties. By the agreement, Heritage was to be a distributor of Encon's fans and related merchandise and to pay Encon for the items.
The distributor agreement, among other clauses, contains the following:
This agreement, when accepted by the seller as herein provided, shall constitute the entire agreement between the parties, and no agreement, promises or representations of any character, either written or oral, not set forth in this agreement shall be binding on the parties hereto.
On the same date, Encon required Dowd to sign an individual guaranty, guaranteeing Heritage's obligations to Encon. Dowd signed the guaranty. According to the guaranty it was "in order to induce Encon Industries, Inc. . . . to enter into the Distributor Security Agreement dated the first day of August, 1980 with Heritage Distributors, Inc. . . . ." The guaranty contained the following clause:
This Guaranty is intended to be, and it is a continuing Guaranty and shall continue in force for life of said agreement (distributor agreement) and modifications or amendments thereof, if any, and this Guaranty shall further continue in force thereafter until any and all transactions of any kind, nature or character whatsoever under said agreement have been completed, and until payment of all debts and liabilities and performance of all obligations hereunder have been completed.
Both the distributor agreement and the guaranty state that interpretation of the documents will be governed by the laws of the State of Texas.
According to Texas law, the guaranty agreement is a "continuing guaranty," Blount v. Westinghouse Credit Corporation, 432 S.W.2d 549 (1968) which is defined at page 553 as follows:
A continuing guaranty is one which is not limited to a single transaction, but which contemplates a future course of dealing, covering a series of transactions, generally for an indefinite time or until revoked. It is prospective in its operation and is generally intended to provide security with respect to future transactions, within certain limits, and contemplates a succession of liabilities, for which, as they accrue, the guarantor becomes liable. 38 C.J.S. Guaranty § 7.
There was evidence that Heritage was in arrears in its payments to Encon, and as result, pursuant to the distributor agreement Encon seized the goods from Heritage. After crediting Heritage's account with the value of the goods taken, the balance owed by Heritage was $28,683.73, plus some unexplained "charge-backs."
The distributorship agreement did not provide for a sole New England or protective distributorship for Heritage, and did not provide for discounts or for Encon to furnish Heritage with promotional materials. Over the plaintiff's objection, Dowd testified that prior to signing the distributorship agreement and the guaranty, Encon stated Heritage would have a protective territory, discounts and promotional material. Dowd further testified that Encon established two other distributorships in close proximity to Heritage, and did not provide Heritage with maximum discounts or promotional material.
At the close of the evidence, the plaintiff filed requests for rulings and claims to be aggrieved by certain denials.
The trial judge, although he found in favor of the plaintiff as against Heritage, made the following findings:
Encon has breached the main agreement with Heritage by failing to honor the protected territory, by failing to provide distributor discounts and promotional material. The breach of the agreement between Encon and Heritage changed the circumstances under which the distributorship arrangement was to be conducted. Thus Dowd as a guarantor was put in a different position from that which he understood would be the case when he undertook the obligation of guarantor. . . . The Court does find the guarantee to be unenforceable.
There was error.
Dowd signed both the distributorship agreement and guaranty after conducting the negotiations.
Although the plaintiff did not file a written claim of report relating to the trial judge overruling his objection based on the parol evidence rule as required by Dist./Mun. R. Civ. P. Rule 64(a), this is a situation where Rule 64(a) does not apply. The parol evidence rule is not a rule of evidence, but is a principle of substantive law. Scirpo v. McMillan, 355 Mass. 657 (1969). Here, where the parties have put their agreement into an unambiguous written form that the parties considered final, evidence of negotiations leading up to this final form is immaterial. Shain Investment Co., Inc. v. Cohen, 15 Mass. App. Ct. 4 (1982). In fact, even if the prior statements are admitted into evidence they cannot be considered by the fact finder. Frick v. New England Insulation Co., 347 Mass. 461 (1964). From the judge's findings of fact that Encon breached its distributorship agreement, it is clear that he considered the parol evidence to add to the distributorship agreement items that were not called for by the written unambiguous agreement of the parties. This issue is presented by the established report which states the plaintiff "being aggrieved by the court's consideration of evidence which was either required to be given little or no weight. . . ."
Therefore the finding for Dowd is set aside and the matter is returned for a new trial.