Summary
stating that an unjust enrichment claim may proceed despite the existence of an explicit contract if fraud exists
Summary of this case from Adler v. Elk Glenn, LLCOpinion
No. 30767
Decided February 28, 1947.
Contracts — Written agreement not rendered ambiguous by operation resulting in hardship — Party not relieved from improvident agreement, when — Compensation payable only in accordance with written agreement for services, when — Person not entitled to compensation on ground of unjust enrichment, when.
1. Where a written agreement is plain and unambiguous it does not become ambiguous by reason of the fact that in its operation it will work a hardship on one of the parties thereto and corresponding advantage to the other. ( Ohio Crane Co. v. Hicks, 110 Ohio St. 168, approved and followed.)
2. Courts do not relieve a party competent to contract from an improvident agreement in the absence of fraud or bad faith.
3. A person competent to contract who, pursuant to a written agreement with another has performed services, is entitled to compensation therefor only in accordance with the terms of such bargain, in the absence of fraud, illegality or bad faith.
4. In the absence of fraud or bad faith, a person is not entitled to compensation on the ground of unjust enrichment if he received from the other that which it was agreed between them the other should give in return.
APPEAL from the Court of Appeals for Cuyahoga county.
Ullmann brought an action in the Municipal Court of Cleveland for $4,000 due for services as a salesman, against George S. May d. b. a. George S. May Company. In his third amended petition Ullmann set up three causes of action, the first and second causes being on a contract and the third cause being upon the quantum meruit. May filed an answer admitting the contract and the cancellation thereof. May further alleged in his answer that there was due to Ullmann, the plaintiff, the sum of $139.83, tender of which had been made to Ullmann. May denied that any further or additional sums of money were due Ullmann and denied wrongful termination of the contract.
The Municipal Court rendered judgment in favor of Ullmann and against May for the sum of $4,000 and costs.
Upon appeal to the Court of Appeals the judgment of the Municipal Court was modified by reducing the judgment in favor of Ullman to $189.50 and the judgment as so modified was affirmed.
The case was tried upon a stipulation of facts including the contract and certain correspondence between the parties. It was stipulated that Ullmann remained in the active employ of May until December 23, 1944, when Ullmann received a letter from May dated December 19, 1944, terminating the contract. It was further stipulated:
"(5) That on December 23, 1944, and thereafter, the defendant was servicing certain clients procured for the defendant by the plaintiff, to wit: Cleveland Trencher Company and Buckeye Brass Company, both procured by plaintiff many weeks prior to December 23, 1944, and upon whose payments plaintiff received commissions prior to December 15, 1944;
"(6) That subsequent to December 15, 1944, and up to and including the period of time covered by the third amended petition, the defendant [May] made additional collections from said clients in the sum of seventy-nine thousand dollars ($79,000), no part of which was ever paid to plaintiff [Ullmann];
"(7) That the commissions on said collections are to be computed at five per cent (5%) in the event plaintiff prevails in this action."
Under item (9) it was stipulated that defendant had tendered to plaintiff the sums of $22.50 and $167.
Under item (10) it was stipulated: "That plaintiff has not been informed by the defendant of minimum or 'must' standards of employment or production."
The contract between the parties recited that the "employer is engaged in the business of management and industrial engineering and the business of installing systems covering sales and administrative expense, budgets, accounting and cost methods, overhead rates, factory, clerical, direct and indirect labor, production planning and scheduling, inventories, and other cost elements."
The employer agreed to pay Ullman the commissions and bonuses set up in a schedule in the contract. The contract contained also the following provision:
"(c) In addition to payment due under provisions above, commissions will be paid employee as shown below on all sums of money billed to, and collected from each individual client personally procured by the employee; said commissions to be paid only during the time this agreement remains in full force and effect." (Italics ours.)
It was mutually agreed that the employee should "enter into the service of the employer, and employer agrees to employ said employee in and about its aforesaid business beginning the 31st day of January, 1944, and continuing until terminated by the action of the parties hereto as herein provided." (Italics ours.)
The contract contained the further provision that:
"(a) This contract of employment may be terminated by either of the parties hereto upon giving to the other party not less than seven days' written notice of the intention to cancel this agreement * * *." (Italics ours.)
Ullmann agreed also, inter alia, that during the term of his employment he would devote his entire time and attention and give his best efforts and skill as a salesman exclusively to the business and in and about the interests of employer, and would perform such services in and about the business of employer as may, from time to time, be assigned to him, and would in all respects do his utmost to enhance and develop the best interests and welfare of employer and its business.
The letter of December 19, 1944, from May to Ullmann was as follows:
"This is to advise you that we are cancelling your special representative working agreement, dated January 31, 1944, effective date December 16, 1944. This notice is being sent to you after a thorough discussion with your regional manager, Mr. G.M. Noonan, and your district manager, Mr. George Mathews, as well as Mr. Moss, the executive supervisor.
"We regret that our association did not prove to be mutually profitable, and in your particular instance your attitude has been excellent; however we do have must performance standards, and under the circumstances have no other alternative.
"We take this opportunity to wish you the very best of luck for the future and if we are able in any way to assist you in making a new connection, do not hesitate to call on us.
"If you happen to be in Chicago, we will be happy to see you if you care to drop in."
In answer to the foregoing letter Ullmann wrote May's representative under date of December 24, 1944, a letter in which the following appeared:
"In answer to your letter of December 19th cancelling my special representative working agreement I have the following questions to ask: (1) According to my contract I am to be given seven days written notice. Your letter of the 19th of December terminates me as of the 16th of December which seems rather odd arithmetic. In accordance with the contract the termination should be as of the 26th of the month as I have worked through the 23rd at which time I received your letter. I am submitting my expense account up to that date. (2) What provision is to be made for commissions due me for the Continental Lithograph Co., Carey Machine and the current billing on Cleveland Trencher? The least that you can do for a man when you let him go is to let him know how he stands financially. * * *
"In the second paragraph of your letter you say you have must standards. If you check back in your records you will find that for the past year a considerable amount of the expensive talent has come out here in Cleveland in order to show us how to get more production. L. S. got one deal here. T. M. none that I know of and to my knowledge N. only got one or two that stuck. It only proves to me that in this area engineering cannot be sold by high pressure for one very good reason. The companies in this part of the country have been in the hands of the same families for a good many years and as a result are ultraconservative. When you start to high pressure a conservative man he shows you the door. If you think that you can get more sales by turning over your sales force as often as you do you are greatly mistaken. If you recall I wrote a letter to Mr. McG. a week after I was on the job outlining my impressions and idea. (I was never extended the courtesy of an answer.) Those impressions were further confirmed by my association with the May Co. I really think it a pity that you can let such a gold mine get away from you for the lack of some sound sales training and intelligent management. I am not asking for my job back.
"I hope to receive a prompt answer regarding the initial paragraph of this letter. My full kit and all other May Company property which I have will be expressed to you within a couple of days." (Italics ours except "not" last above.)
Under date of January 11, 1945, May's representative answered Ullman's letter of December 24, 1944, the material parts thereof reading:
"Please be advised that I will advise our accounting department to credit you with all accruals dating from one week subsequent to December 19, in accordance with the terms of your working agreement.
"With reference to credit on the several jobs that you referred to, I believe that your working agreement will give you the answer to any question that you might have in mind.* * *
"Again wishing you the very best of everything, I am."
The Court of Appeals by a divided court modified the judgment of the Municipal Court. In the majority opinion it was said:
"* * * by the plain provisions of the contract the right to receive commissions for contracts secured by the appellee was to terminate on the day of his dismissal from the appellant's service."
The dissenting judge took the position that the record presents a case of unjust enrichment of the defendant.
The case is in this court following the allowance of a motion to certify the record.
Mr. S.H. Moss, for appellant.
Mr. E.A. Plazer, for appellee.
The decision of this case rests upon whether there is any unlawfulness or ambiguity in the provision of the agreement to the effect that commissions were to be paid only during the time that the agreement remained in full force and effect.
It is to be observed at the outset that the agreement here under review does not contemplate the sale of merchandise. It does involve the "sale" of the employer's services to be performed for clients obtained by the salesman and paid for by such clients as billed by the employer and collected from the clients. Items (5) and (6) leave no doubt that the practice did not differ from the terms of the agreement that appellant's commissions were to be paid only on such sums of money as were billed to and collected from each individual client personally procured by appellant.
The agreement provided:
"(c) In addition to payment due under provisions above [about which there is no dispute], commissions will be paid employee as shown below on all sums of money billed to, and collected from each individual client personally procured by the employee; said commissions to be paid only during the time this agreement remains in full force and effect."
The agreement contained the further provision that:
"This contract of employment may be terminated by either of the parties hereto upon giving to the other party not less than seven days' written notice of the intention to cancel this agreement."
There was no breach of the contract unless the failure to pay appellant a commission on billings and collections made subsequent to the termination of the contract constitutes such breach.
The trial court found that there was a termination of the agreement as of the 26th of December 1944. Subsequent to the termination of the agreement, $79,000 of additional collections were made from clients procured by appellant.
Appellant claims to be entitled to the sum of $4,000 as commissions on such last mentioned collections. Appellant's claims and our conclusions thereon may be summarized as follows:
Appellant claims: "That the commissions were payable absolutely." We are of the opinion that the commissions were payable conditionally and that such condition was not fulfilled.
Appellant claims: "That the discharge was in bad faith and wrongful." There is no proof to support this claim.
Appellant claims: "That under quantum meruit and unjust enrichment theories plaintiff was entitled to recovery." Neither of these theories applies for the reason that there is an express contract which has not been breached, and no fraud or bad faith necessary to support the theory of unjust enrichment has been shown.
It is to be noted that the provision for the payment of commissions is contained in a single sentence which we do not find to be either unlawful or ambiguous. Appellant argues for a "fair and reasonable construction rather than a harsh or unreasonable one; an equitable construction rather than one giving a party an advantage over the other; one that would make the contract fair, customary and one which prudent men would naturally execute as contrasted to inequitable, unusual, hard, and such as one would not likely enter into." The "construction" contended for by appellant would not be a construction at all but would amount to the making of a new contract for the parties, which is not the function of a court.
Appellant argues that "commissions belong to the salesman upon procuring the client or order. They are payable absolutely."
This claim is contrary to the plain provision that commissions would be paid on all sums of money billed to and collected from each client procured by the employee with the clear limitation that such commissions are to be paid only during the time the agreement remains in full force and effect. The stipulations and the agreement indicate that the salesman's service to the clients which he procured followed through during the period appellant's employer was employed by such client unless the agreement between appellant and his employer were terminated.
That the terms of the agreement appear (and may work out to be) harsh may be admitted, but unless there is fraud or other unlawfulness involved, courts are powerless to save a competent person from the effects of his own voluntary agreement. In other words, courts do not relieve competent parties from an improvident agreement.
In the per curiam opinion in Ohio Crane Co. v. Hicks, 110 Ohio St. 168, 172, 143 N.E. 388, it is said:
"We recognize the fact that, where a contract is plain and unambiguous, it does not become ambiguous by reason of the fact that in its operation it will work a hardship upon one of the parties thereto and a corresponding advantage to the other, that it is not the province of courts to relieve parties of improvident contracts * * *."
In 12 American Jurisprudence, 641, Section 149, it is said:
"It is the inherent and inalienable right of every man freely to deal or refuse to deal with his fellow men. Competent persons ordinarily have the utmost liberty of contracting, and their agreements voluntarily and fairly made will be held valid and enforced in the courts. Parties may incorporate in their agreements any provisions that are not illegal or violative of public policy."
While the appellant alleged bad faith and fraud on the part of May in his petition, we are unable to find any proof thereof in the stipulation of facts which contains all the evidence upon which this case was tried. To establish fraud or bad faith, clear and convincing proof is required.
We cannot deduce fraud or bad faith from the fact that the employer followed the terms of the agreement which plainly states the personal service nature of the employer's business. Unless a salesman is able to produce business, the employer cannot keep his force of Accountants and engineers busy which, of course, results in a loss to the employer. In item (5) of the stipulation set out above in the statement of facts the only business procured by appellant had been "procured by plaintiff many weeks prior to December 23, 1944." It was stated in the employer's letter of December 19, 1944: "We regret that our association did not prove to be mutually profitable, * * * however we do have must performance standards. * * *" In appellant's letter of December 24, 1944, appellant gives his version of why these "must" standards have not been met. (Appellant was not advised of such standards.)
In 26 Ohio Jurisprudence, 222, Section 91, it is said:
"If an employment is at will, the employer may discharge the employee at any time without incurring any liability as for breach of contract."
In the dissenting opinion in the Court of Appeals it is said:
"If there had been no cancellation of this contract by the defendant, the plaintiff would have been clearly entitled to this commission without any further effort on his part." While this hypothetical statement is true, yet we are dealing here with realities and whether the commissions were earned under the terms of the contract is to be measured by such terms, and not what we think such terms ought to have been.
We are of the opinion that the rule here applicable is succinctly set out in the Restatement of the, Law of Restitution, Chapter 4, page 447, Section 107, as follows:
"(1) A person of full capacity who, pursuant to a contract with another, has performed services or transferred property to the other or otherwise has conferred a benefit upon him, is not entitled to compensation therefor other than in accordance with the terms of such bargain, unless the transaction is rescinded for fraud, mistake, duress, undue influence or illegality, or unless the other has failed to perform his part of the bargain."
Under Comment on page 448, ibid, it is said: "* * * A person is not entitled to compensation on the ground of unjust enrichment if he received from the other that which it was agreed between them the other should give in return."
We are not unmindful of the cases whose facts are closely analogous with those of the case at bar. The case with the facts nearest those of the instant case is Singer Mfg. Co. v. Brewer, 78 Ark. 202, 93 S.W. 755. In that case there was a delivery of merchandise — a sale completed — and it was held by the court that a provision in the contract that all claims for compensation should cease immediately upon the termination of the agreement should not work a forfeiture of the compensation for sales of merchandise already delivered. In the instant case we have a different situation, to wit, the "sale' of an agreement to use the services of the employer. The record in the instant case does not disclose the period for which the services of the employer to clients obtained by appellant were to be so used but it is clear that the employer did not earn and had no right to bill the clients for such services until they were performed. It is clear also that all services performed for such clients by the employer prior to the termination of appellant's agreement were billed and the commissions thereon paid to appellant. So that we have left in the case the question of commissions on sales of employer's services for services which had not been rendered at the time of the termination of the contract in question.
In the case of Singer Sewing Machine Co. v. Kaltwasser (Tex.Civ.App.), 255 S.W. 631, it was held:
"Where a contract of agency for the sale of sewing machines and collection of accounts provided that it might be terminated at the pleasure of either party, it was error to allow the agent to recover on a cross-bill fees which he might have collected, if he had not been discharged; the discharge not being wrong."
We are not unmindful of the statement set forth in 2 Restatement of the Law of Agency, Chapter 14, page 1069, Section 454, to wit:
"An agent to whom the principal has made a revocable offer of compensation if he accomplishes a specified result is entitled to the promised amount if the principal, in order to avoid payment of it, revokes the offer and thereafter the result is accomplished, the agent's prior efforts being the effective cause thereof." (Italics ours.)
In the instant case there was no revocable offer of compensation. Here the compensation was payable unconditionally during the time that the agreement between the parties remained in full force and effect. The agreement specifically provided that the agreement might be terminated, by either party and was so terminated by the employer according to the terms thereof. Had the agreement in the instant case provided that if appellant secured the business in question he would be paid a specified compensation and after appellant had accomplished the specified result the employer had attempted then to revoke the offer, such revocation would not be effective, and we would then have such a case as is referred to in Section 454, supra. Under such circumstances the claim of appellant here, that "the commissions belong to the salesman upon procuring the client or order," would be valid. But we do not have a case which falls under Section 454, supra.
Therefore the judgment of the Court of Appeals should be and hereby is affirmed.
Judgment affirmed.
MATTHIAS, ZIMMERMAN and SOHNGEN, JJ., concur.
WEYGANDT, C.J., dissents.
HART, J., not participating.