BARRY WOOD vs. ROY LAPIDUS, INC. & another. [Note 1]

KASS, J. Some six months of confinement to a hospital bed following a skiing accident in the winter of 1967 inspired the defendant Roy Lapidus to invent a device which would prevent decubitus ulcers (bed sores). While still abed, Lapidus developed his "Lapidus Airfloat System" and

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obtained the occasional collaboration of the plaintiff Barry Wood, who was a social and business friend. This case concerns Wood's share in the corporation, Roy Lapidus, Inc. (the corporation), which Lapidus had earlier organized and which came to manufacture and sell the Airfloat System.

From the trial judge's findings of fact we also learn that on November 30, 1967, Lapidus filed an application for a patent on the Airfloat System and that the United States Patent Office ultimately issued to him Patent No. 3,653,083 for his device. Wood was not involved in the actual invention of the Airfloat System and did not contribute to obtaining the patent.

During the development and production phase, however, Wood spent an average of ten hours per week on the construction and assembly of the Airfloat System. In due course Lapidus offered Wood a piece of the business. On May 27, 1968, Lapidus authored and delivered to Wood a letter (the full text of which is set out in the margin) [Note 2] setting forth the terms on which Wood might acquire stock in the corporation. Whatever merits that letter had in the way of brevity were overshadowed by its demonstrable ambiguity. The letter acknowledged receipt of $2,500 toward acquisition of a five percent interest in "my medical aids equipment

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business." An additional $2,500 was to be paid within six months, whereupon Wood was to have "full ownership, free of any encumbrances" and one Harold S. White, a lawyer (presumably acting for Lapidus), was to issue to Wood five percent of the stock "of the corporation that is to run the medical aides [sic] equipment business." The last paragraph of the letter, however, says that the "complete" price for the five percent interest is "really the sum of $12,000" to be paid "out of any and all income" that Wood received from "this business."

Wood paid the second instalment of $2,500 but never received a stock certificate. He never paid the remaining $7,000. In 1976, the corporation was sold for a figure, net after taxes, of $900,000. [Note 3] The trial judge found that Wood was vested with a five percent interest in the corporation, that Lapidus and the corporation had waived payment of the $7,000 which was the balance of the purchase price, and that Wood was entitled to $45,000. [Note 4]

On their appeal, the defendants urge two points: (1) that Wood's interest in the corporation was conditioned on his paying the full purchase price; and (2) that the judge erred in finding that Lapidus' waiver of the payment of the additional $7,000 was supported by consideration.

1. The Status of the $7,000 Obligation.

Whether the letter of May 27, 1968, outlining the terms on which Wood might buy into the corporation expressed the obligation to pay an additional $7,000 as a condition precedent, [Note 5]

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a condition subsequent, [Note 6] or an independent obligation requires ascertaining the intent of the parties as expressed in the instrument. Gardiner v. Corson, 15 Mass. 500, 503 (1819). To that end, a court considers the words used, see MacDonald v. Gough, 326 Mass. 93, 96 (1950); the document taken as a whole, King Features Syndicate, Inc. v. Cape Cod Bdcst. Co., 317 Mass. 652, 654 (1945); Johnson v. Worcester Business Dev. Corp., 1 Mass. App. Ct. 527, 529 (1973); and surrounding facts, Robert Indus., Inc. v. Spence, 362 Mass. 751, 755 (1973). See Fay, Spofford & Thorndike, Inc. v. Massachusetts Port Authy., 7 Mass. App. Ct. 336, 341-342 (1979). We agree with the trial judge's conclusion that the language in the second paragraph of the May 27, 1968, letter, which speaks of Wood having "full ownership, free of any encumbrances" upon payment of the second instalment of $2,500, negates the notion that Wood's ownership of the stock was conditional. The obligation to pay the additional $7,000 was an independent one. There was also evidence to which the judge could give weight that Lapidus had frequently referred to Wood as a stockholder. Pittsfield & No. Adams R.R. v. Boston & Albany R.R., 260 Mass. 390, 398 (1927). Parol evidence, of course, was admissible in aid of construing an ambiguous written instrument. Id. LaCouture v. Renaud, 325 Mass. 33, 36-37 (1949). If there were any residual doubts on this score, they would be resolved against the defendants by application of the principle that a written instrument is construed strongly against the party who drew it if ambiguous or uncertain language is used. Bowser v. Chalifour, 334 Mass. 348, 352 (1956). It was of no consequence that the corporation never issued and delivered to Wood any stock certificates. Atlantic Transp. Co. v. Alexander Shipping Co., 261 Mass. 1, 11 (1927). Samia v. Central Oil Co., 339 Mass. 101, 110 (1959).

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The defendants urge, however, that construction of the May 27, 1968, letter was not open to the court because the plaintiff in his complaint had made a judicial admission that he would receive his five percent interest in the business upon payment of the total $12,000. A judicial admission is a proposition of fact in the form of acts or declarations during the course of judicial proceedings which conclusively determine an issue. Leach & Liacos, Massachusetts Evidence 14-15 (4th ed. 1967). 9 Wigmore, Evidence Section 2588, at 586 (1940). Allegations in pleadings may constitute judicial admissions, G. L. c. 231, Section 87, but only if they are allegations of fact. Wasserman v. Tonelli, 343 Mass. 253, 257 (1961). Leach & Liacos, supra at 21.

It does not appear that the significance which the defendants seek to attach to the seventh paragraph of the complaint [Note 7] was called to the attention of the trial judge. We, therefore, need not consider the question, Gerber v. TyData, Inc., 5 Mass. App. Ct. 898, 898-899 (1977), although we observe in passing that, fairly construed, the statements in the complaint as to the effect of the written agreement between the parties were conclusions of law rather than allegations of fact. See Wasserman v. Tonelli, 343 Mass. at 257; Steranko v. Inforex, Inc., 8 Mass. App. Ct. 523, 527-528 (1979) (court fairly construes pleadings). See also Mass.R.Civ.P. 8(f), 365 Mass. 751 (1974) (pleadings to be construed to do substantial justice).

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2. Waiver of the $7,000 Payment.

There was evidence that Lapidus had raised with Wood the matter of the balance of the $7,000 due for his interest in the corporation and that Lapidus had expressly waived payment of the additional amount. To the extent that the waiver by Lapidus was gratuitous, it would not bind him or the corporation. Wood's services to the defendants before the waiver would not support a binding promise. Conant v. Evans, 202 Mass. 34, 38 (1909). Field v. Hamm, 254 Mass. 268, 270 (1926). The judge found consideration for the waiver by Lapidus of the $7,000, in Wood's continuing to work for the corporation notwithstanding that he was not contractually bound so to do. See Balkin v. Frank M. Katz, Inc., 373 Mass. 419, 421 (1977). The record, however, is devoid of anything which supports a finding that there was an understanding that Wood would continue in his employment in exchange for waiver of the $7,000 payment. Indeed, so much of the record as touches on any understanding negates the conclusion that one existed. The subject came up during cross-examination of Wood, the pertinent portion of which was as follows:

"[Defendant's Counsel:] Q. And at the time, did Roy ask anything of you so that he would forgive the $7,000.00?

Wood: A. No.

Q. He didn't ask you to promise that you continue working for any particular period of time in the future at any particular wage or any other such agreement?

A. No.

Q. And prior to the $7,000.00 he hadn't said anything of that sort to you in order for him to forgive the $7,000.00, is that correct?

A. Correct."

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Nor was there any showing, as there must have been under our case law, "that the continued employment [was] in reliance on the promised benefit." Balkin v. Frank M. Katz, Inc., 373 Mass. at 422. The finding, therefore, that Wood continued to work for the corporation in consideration of the waiver and forgiveness of the $7,000 payment was clearly erroneous. Mass.R.Civ.P. 52(a), 365 Mass. 816 (1974). Accordingly, Wood's recovery must be reduced by $7,000, the amount due to the corporation for the balance of Wood's stock.

The judgment is to be modified by substituting the figure $38,000 for the figure $45,000 in the first and second paragraphs thereof and, as so modified, is affirmed.

So ordered.