Fortune v. National Cash Register Co.
Fortune v. National Cash Register Co.
Dissenting Opinion
(dissenting). The jury found, and the majority is willing to assume (as stated in its opinion at 390) that the defendant “terminated the plaintiff’s contract as a salesman for the purpose of avoiding the incurring of further liability to the plaintiff under the contract for bonus credits applicable to the First National order,” and thus acted in bad faith. But the majority reads out of the contract the “implied covenant [“in every contract”] that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract, which means that in every contract there exists an implied covenant of good faith and fair dealing.” Druker v. Roland Wm. Jutras Associates, Inc. 370 Mass. 383, 385 (1976), quoting from Uproar Co. v. National Bdcst. Co. 81 F. 2d 373, 377 (1st Cir.), cert. den. 298 U. S. 670 (1936). Restatement 2d: Contracts, § 231 (Tent. Drafts Nos. 1-7, 1973). (“Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.”) I do not believe the extraordinary reading the majority gives to this “Salesman’s Contract” is warranted by the provisions that allow either party to terminate the contract at will “with or without cause,” and the defendant to change the salesman’s territory “at any time.” See Gebhard v. Royce Aluminum Corp. 296 F. 2d 17, 18 (1st Cir. 1961). It is precisely to provisions such as these, where one party is given a wide discretion, that a good faith limitation would seem particularly applicable. See, e.g., Chandler, Gardner & Williams, Inc. v. Reynolds, 250 Mass. 309, 314 (1924); Krauss v. Kuechler, 300 Mass. 346, 349 (1938); G. L. c. 106, § 1-208 (Uniform Commercial Code). See also Restatement 2d: Contracts, § 254, comment a (Tent. Drafts Nos. 1-7, 1973). See generally, Corbin, Contracts, § 644 (1960) (“Promises Conditional on Personal Satisfaction”); Williston, Contracts, § 675A (3d ed. 1961) (“Promise Conditional on Satisfaction”, especially pp. 189-191).
Further, the implication in the majority opinion that parties may contract themselves out of an obligation of good faith dealing seems to me to be unsound. It runs counter to the Uniform Commercial Code which provides in c. 106, § 1-203 (tracked in § 231 of the Restatement 2d quoted above), that “[ejvery contract or duty within this chapter imposes an obligation of good faith in its performance or enforcement,” and further (in § 1-102) that “the obligations of good faith, diligence, reasonableness and care prescribed by this chapter may not be disclaimed by agreement.” Compare Restatement: Contracts, § 575(1) (1932) (“A bargain for exemption from liability for the consequences of a willful breach of duty is illegal...”). Certainly employment contracts, in which the parties are probably less likely to have equal bargaining power, should not have less stringent guarantees of fair dealing.
Finally, I see no distinction in principle between the present case and RLM Associates, Inc. v. Carter Mfg. Co. 356 Mass. 718 (1969), which, as the record in that case reveals, also involved a detailed, written “agreement” signed by both parties which could “be cancelled by either of the two parties upon thirty days written notice.” That case seems to me to answer the suggestion in the majority opinion that a duty of good faith dealing may be applicable only to unilateral contracts and not ordinary bilateral con
Because the jury could have believed that the defendant’s termination of the plaintiff’s contract was motivated by a desire to avoid the paying of commissions I believe the case was properly submitted to the jury.
Opinion of the Court
By the first two counts of the plaintiff’s amended declaration, he seeks recovery of certain bonuses claimed to be due him under a written contract with the defendant, his former employer. By count three he seeks recovery in the same amount on a quantum meruit for the fair value of services which allegedly gave rise to the bonuses. The defendant appeals from a judgment for the plaintiff in the amount of $45,649.62.
The only question we find it necessary to reach is whether the defendant’s motion for a directed verdict was properly denied.
The plaintiff was employed by the defendant as a salesman under a written contract terminable at will, without cause, by either party. The contract, apparently used generally by the defendant, assigned to a salesman a “territory”, consisting not of a geographical area but of certain enumerated customer accounts. The contract provided that the salesman was to be paid a weekly salary in a fixed amount plus “bonus credits” measured by sales in the “territory” (i.e. to the accounts) assigned to him, whether such sales were made by him or someone else. Bonus credits were computed as a percentage of the price of products sold (with different percentages for different products), subject to adjustments not now material. The salesman was to be paid a percentage of the bonuses thus computed: seventy-five percent if the territory was assigned to him at the date of the order, twenty-five percent if the territory was assigned to him at the date of delivery and installation, and one hundred percent if the territory was assigned to him at both times; provided that the salesman’s “bonus interest in any order shall terminate... [i]f [with exceptions not material] shipment of the order is not made within eighteen months from the date of the order unless the [t]erritory is assigned to... [him] at the date of delivery and installation.”*
In early 1969 the plaintiff was notified that his contract was terminated, effective December 2, 1968. He was permitted to remain in the defendant’s employ thereafter in a “sales supportive” capacity at his previous weekly salary, but without a written contract and without an assigned territory. During the eighteen-month period following the order of November 29, 1968, 774 of the ordered machines were delivered to First National. The plaintiff received seventy-five percent of the bonus credit applicable to the machines so delivered, but the remaining twenty-five percent was denied him because he was no longer assigned as salesman to the First National account when the deliveries were made. In June, 1970, the plaintiff was discharged from the defendant’s employ altogether. After that date an additional 729 cash registers were delivered to First National pursuant to the order of November 29, 1968, but the plaintiff received no bonus payments on them because they had not been delivered within eighteen months of the order.
The second factual distinction is that the plaintiff’s line of cases is grounded on the concept that the principal should not be permitted to enjoy the product of the broker’s efforts without paying the broker the compensation promised.
Assuming, with the plaintiff, that those cases might have application to some cases of bilateral employment contracts, it is the opinion of a majority of the court that those cases have no application in this case because of the particular contractual provisions agreed to by the parties. One of those provisions expressly provided that either party could terminate the contract “at will and without cause.” Another provision plainly contemplated that the defendant could change the plaintiff’s territory and, in consequence thereof, his bonus entitlements after orders had been obtained.
As to count three of the amended declaration, in which the plaintiff claims that the defendant “owes him the reasonable value of services performed” by him in connection with the First National order, there was no evidence that the defendant ever expressly or impliedly promised to pay the plaintiff the “reasonable value” of any “services” rendered by him. What the defendant promised was a bonus for orders obtained and deliveries made in accordance with, and subject to the conditions imposed by, the written contract. Either the defendant was liable for such a bonus or it was not liable at all. Lattuca v. Cusolito, 343 Mass. at 752. Gaynor v. Laverdure, 362 Mass. 828, 840 (1973). See John T. Burns & Sons, Inc. v. Brasco, 327 Mass. at 263. It follows that the plaintiff was not entitled to recover under count three.
Judgment reversed.
Judgment for the defendant.
This case was initially heard by a panel composed of the Chief Justice and Justices Goodman and Armstrong and was thereafter submitted on the record and briefs to Justice Grant (Justice Keville not participating) who took
While the defendant’s motion for a directed verdict was defective in that it failed to “state the specific grounds therefor” (Mass.R.Civ.P.
Other clauses provided that the plaintiff’s “bonus interest shall be determined by the date of the order and whether the territory in which the sale is made is assigned to you for coverage or supervision at the date of delivery and installation, except in the case where the order does not include specific shipping and delivery instructions, in which case bonus credit shall vest in the salesman assigned to the territory at the date of delivery and installation ... If delivery and installation is not made following shipment from the factory ... within [thirty, sixty or ninety days, depending on the type of product] ... your bonus interest ... shall terminate ... unless (a) The territory is assigned to you for coverage at the date of delivery and installation, or (b) The terri
At one point the judge appears to have adopted the view that the issue of bad faith might be relevant only to the quantum meruit count. As the judgment ultimately entered did not specify the count or counts on which it was based, however, we assume for purposes of this opinion that it was based on all three counts.
The judge instructed the jury that they could find that the defendant acted in bad faith if its action in either instance was taken for the purpose of escaping liability to the plaintiff for any part of the bonuses which would otherwise have been due him.
Cadigan v. Crabtree, 186 Mass. 7 (1904). O’Connell v. Casey, 206 Mass. 520, 528 (1910). Waters v. Pacific Wool Prod. Co. 268 Mass. 83, 87-88 (1929). Siegel v. Lowe, 327 Mass. 154, 155-156 (1951). Dragone v. Dell’Isola, 332 Mass. 11 (1954). Malloy v. Coldwater Seafood Corp. 338 Mass. 554, 562-563 (1959). O’Malley v. Markus, 339 Mass. 766, 768-770 (1959). The plaintiff cites Eastern Paper & Box Co. Inc. v. Herz Mfg. Corp. 323 Mass. 138 (1948), as part of the same line of cases, although it goes off on wholly different principles.
The second question, having to do with the termination of the plaintiff’s employment, appears to have no bearing on entitlement to bonus credits. In addition, there is nothing in the record to suggest that the defendant delayed any deliveries so as to have them made after, rather than before, the expiration of the eighteen-month period.
The defendant relies heavily on Gebhard v. Royce Aluminum Corp. 296 F. 2d 17 (1st Cir. 1961), in which the court, applying Massachusetts law, stated: “Pausing here, it is difficult to see how an agreement at will can be terminated in bad faith, other than with respect to nonpayment of commissions or other matters already accrued ... It must be clear that when employment is at will the employer is free to terminate ... at any time.” 296 F. 2d at 18. The plaintiff in that case was primarily contesting the validity of his termination. The plaintiff in this case is not contesting the validity of his termination, but is asserting a right to receive commissions on the First National order irrespective of the termination.
Malloy v. Coldwater Seafood Corp. 338 Mass. 554 (1959), on which the plaintiff relies most heavily (for the reason that it illustrates that the principle on which he relies applies not only in the case of a broker engaged for the purpose of effecting a single, isolated sale, but also in the case of a broker engaged on a continuing basis), is no exception: there the principal’s agreement to pay its broker a commission on sales of its products was not supported by a promise by the broker to make such sales or by any other consideration, and hence was nothing more than an offer to enter into a series of unilateral contracts.
The broker might recover his commission “[i]f, in the midst of negotiations instituted by the broker, and which were plainly and evidently approaching success, the seller should revoke the authority of the broker, with the view of concluding the bargain without his aid, and avoiding the payment of commissions about to be earned ...” Cadigan v. Crabtree, 186 Mass. at 13, quoting from Sibbald v. Bethlehem Iron Co. 83 N. Y. 378 (1881). “Where the principal revokes the broker’s authority in bad faith in order to secure to himself the fruits of the broker’s work without paying him for it, the revocation, being in fraud of the broker’s rights, is of no effect so far as those rights and the trade subsequently made are concerned.” O’Connell v. Casey, 206 Mass. at 528. “The cases in which such bad faith has been found to exist are cases in which a sale has later been made. Profit from the plaintiff’s exertions seems essential to proof of bad faith.” Elliott v. Kazajian, 255 Mass. at 464. “... [S]uch discharge was not made in good faith, but was made to obtain the benefit of the plaintiff’s efforts without paying for them.” Waters v. Pacific Wool Prod. Co. 268 Mass. 83, 87 (1929). “Bad faith in such connection means a purpose on the part of the defendant to obtain without payment a profit from the plaintiff’s exertions.” Brooks v. Gregory, 285 Mass. 197, 205 (1934). “The jury could find that the plaintiff’s efforts, though not extensive, were the efficient cause of the sale ... [and that the defendant] acted in bad faith, with the design to avail himself of the plaintiff’s services without paying him.” Siegel v. Lowe, 327 Mass. at 155. “The owner cannot act in bad faith, and that means that he cannot revoke the broker’s authority for the purpose of avoiding the payment of a commission to him and then sell the property to the customer procured by the broker.” Dragone v. Dell’Isola, 332 Mass. at 13. Contrast RLM Associates, Inc. v. Carter Mfg. Corp. 356 Mass. 718 (1969), a rescript opinion in which the court stated “RLM, entitled to a commission on any sale in the territory, was not bound to show to what extent it had contributed to obtaining the award [of a government procurement contract], although the evi
The evidence indicated that the plaintiff, previous to his being assigned the New England territory, had been assigned to a territory in Minnesota, and in consequence of his transfer had forfeited bonus credits he would have been paid had he remained in Minnesota. Conversely it is plain that the terms of the contract entitled him to receive bonus credits applicable to deliveries in his territory of machines ordered during the tenures of previous salesmen and delivered within eighteen months of the order.
Reference
- Full Case Name
- Orville E. Fortune vs. the National Cash Register Company
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- Published