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Eulo v. Deval Aerodynamics Inc.

decided: August 7, 1970.


Freedman, Seitz and Van Dusen, Circuit Judges.

Author: Seitz


SEITZ, Circuit Judge.

George Eulo brought this diversity action against his former employer, DeVal Aerodynamics, Inc.*fn1 (DeVal), Charles Russo,*fn2 the former president of DeVal, and John Baldinger.*fn3 Eulo sought compensation allegedly owed him by DeVal for services rendered during the period between March 15, 1959 and May 9, 1961.*fn4 His primary theory in seeking compensation was that DeVal had orally agreed, through its president Russo, to pay him a 5 percent commission on all government contracts he secured, calculated on the gross price of the contracts.*fn5 Alternatively he claimed entitlement to quantum meruit recovery.

The case was tried before a jury which returned a $135,931.33 verdict on special interrogatories in favor of Eulo and against DeVal for quantum meruit damages and verdicts in favor of the Russo estate and DeVal on all other counts. Judgment was entered in favor of Eulo and against DeVal seven months after the verdict on September 23, 1968.*fn6 Shortly thereafter, DeVal filed a motion for judgment notwithstanding the verdict or alternatively a new trial. The district judge subsequently issued an opinion and order granting DeVal's motion for judgment n.o.v. and alternatively ordering a new trial in the event the judgment n.o.v. should be reversed. See Fed.R. Civ.P. 50(c). This appeal by Eulo followed.

Although the issues presented on appeal are not complex, the factual context out of which they arise is intricate and requires some explication. Prior to joining DeVal, Eulo's primary employment was as an independent manufacturer's representative. In this capacity he aided his clients primarily in their bidding on government contracts. In March 1959 Eulo met with Charles Russo, then president of DeVal. This meeting resulted in Eulo joining DeVal on a part-time basis for several months. He eventually gave up most outside activities and joined DeVal on a full-time basis. It is conceded that Eulo aided in securing and worked on government contracts totaling well over three million dollars for DeVal during the period involved in this suit. However, the precise agreement of employment between DeVal and Eulo was the key issue and was hotly contested at trial. Eulo claimed he had a 5 percent commission agreement with advances against commissions to cover day-to-day expenses. DeVal, in contrast, asserted that the "advances," amounting to $200 per week during most of the period in question, were Eulo's salary and that he was to be allowed a bonus only if the company were profitable.

In spite of the increased volume of business during Eulo's tenure with DeVal, DeVal did not show a profit. It went public in late 1960 and in early 1961 negotiations commenced for the sale of Russo's control block of stock to an outside group represented by Lomasney, Loving & Co. An agreement of sale was signed and Russo's shares were deposited in escrow. At the time of trial, however, the deal had not been consummated and the parties were involved in litigation in New York. A condition of the sale had been that Russo be replaced as president by Eulo. Eulo was elected president on May 9, 1961 and was subsequently reelected in November of the same year. However, on January 5, 1962 without any advance warning, the membership of the board of directors was substantially changed and Eulo's resignation was demanded and obtained. Following his abrupt dismissal Eulo brought this action.

During pretrial proceedings, the defendants moved for summary judgment alleging, inter alia, that Eulo's claims were absolutely barred by a release agreement dated May 9, 1961 which he had signed. The motion was denied without opinion. The defendants again invoked the release defense during the jury trial but the trial judge ruled that evidence concerning the proper interpretation of the agreement was irrelevant and would not be admitted. He stated: "I am declaring as a matter of law as far as this case is concerned the release whether it be regarded executory accord or what have you, does not constitute a defense. * * *" The defendants were thus barred from offering evidence of their affirmative defense of release. Subsequently in vacating the jury verdict and ordering that a judgment n.o.v. be entered in DeVal's favor, the district judge reversed his position on the alleged release agreement which he had earlier characterized as no defense. This agreement, which had been executed at the time of the purchase of DeVal by the Lomasney group, was embodied in a letter from Russo to Eulo, which was signed by both men and dated May 9, 1961. It reads as follows:

"May 9, 1961

"George R. Eulo

100 Third Avenue

Haddon Heights, New Jersey

"Dear Sir:

"Reference is made to an agreement made this date between the undersigned and Lomasney, Loving & Co. for the sale and purchase of 100,000 shares of ...

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