LAPO v. AVALON MUSIC, INC., 19026-9-III (Wash.App. 5-31-2001)

FRANK L. KURTZ, C.J.

Robert Lapo was fired by Avalon Music, Inc. He sued, contending he had an implied contract and had provided additional consideration and, therefore, could be terminated only for cause. He also contends he was entitled to a gift of 10 percent of corporate stock, payment for accrued vacation, and severance pay. After viewing the evidence in the light most favorable to Mr. Lapo, we conclude that he failed to establish substantial evidence or a reasonable inference to sustain a verdict on any of his theories of recovery. We affirm the judgment of the trial court.

FACTS

Robert Lapo was hired as a salesperson for Avalon Music in 1992. Less than three years later, Mr. Lapo was promoted to manager and he was paid $12 per hour. His duties as manager included handling inventory, purchasing, accounts payable, payroll, bank deposits, and signing company checks. While Mr. Lapo was manager, the store moved locations. Mr. Lapo planned and supervised the move.

Avalon Music was owned by Steve Clem. After Mr. Lapo was promoted to manager, Mr. Clem frequently told Mr. Lapo that he would `always have a job.' Report of Proceedings (RP) at 111. Avalon did not have an employee manual or any other writing containing policies relating to employees, including vacation time, sick leave, or severance pay.

At one point, Mr. Clem offered to give Mr. Lapo 10 percent of the company's stock. He asked Mr. Lapo to buy another 10 percent of stock at $15,000. Mr. Lapo attempted to obtain a business loan to buy the stock, but he was unable to secure the loan. Ultimately, Mr. Clem did not give Mr. Lapo any stock.

Mr. Lapo attended a small business administration seminar to learn how to obtain financing for a small business. Mr. Lapo told many people that he was becoming a part owner of Avalon. Mr. Lapo testified Mr. Clem's failure to give him any stock caused him considerable embarrassment.

Mr. Clem told Mr. Lapo that he wanted Mr. Lapo to receive a higher hourly wage. When Mr. Lapo was attempting to purchase a house, he brought an employment verification form to Avalon's bookkeeper. Mr. Lapo filled out the form and indicated that he would receive a $2 an hour raise effective October 15, 1995. Mr. Lapo told the bookkeeper to sign the document and she did.

Avalon began to experience financial trouble in May 1996. One Friday, Mr. Clem told Mr. Lapo to stop writing checks, and informed him that the store would not be able to make the payroll. Mr. Lapo loaned employees cash from his personal savings so the employees could get through the weekend.

Mr. Clem told Mr. Lapo that he was extremely upset that Mr. Lapo had been writing checks that were being returned due to insufficient funds. Mr. Clem also told Mr. Lapo that they needed to meet that weekend to discuss the financial situation. Mr. Lapo had other plans for the weekend and told Mr. Clem not to expect a meeting.

The following Monday, Mr. Clem fired Mr. Lapo. Mr. Clem told Mr. Lapo that he was not dedicated to his employment and that the business could no longer afford to employ him. Mr. Lapo was given a paycheck for the hours he worked that day.

Upon his termination, Mr. Lapo was not paid for approximately 80 hours of accrued vacation time. Nor was Mr. Lapo given any severance pay. He filed suit against Avalon, contending that he was wrongfully discharged because he had an implied contract and thus could only be terminated for just cause. Mr. Lapo also contended that he was entitled to backpay from October 15, 1995, for the promised raise of $2 per hour, and he was entitled to 10 percent of the corporate stock as promised by Mr. Clem. Additionally, Mr. Lapo sought payment for his accrued vacation time.

At trial and at the conclusion of Mr. Lapo's evidence, Avalon moved for a directed verdict. The court granted the motion. Mr. Lapo appeals.

ANALYSIS

`Review of a trial court decision denying either a motion for directed verdict or a motion for arrest of judgment requires the appellate court to engage in the same inquiry as the trial court.' State v. Longshore, 141 Wn.2d 414, 420, 5 P.3d 1256 (2000). A directed verdict is appropriate if, after viewing the material evidence in the light most favorable to the nonmoving party, the court determines there is no substantial evidence or reasonable inference to sustain a verdict for the nonmoving party. Id. First, Mr. Lapo contends that his employment was terminable only for cause based on an implied contract, along with additional consideration that he gave to Avalon that was above and beyond his services.

Absent a contract or narrow exception, the general rule in Washington is that an employer or employee can terminate employment at will. Selix v. Boeing Co., 82 Wn. App. 736, 740, 919 P.2d 620 (1996). As a result, an employer generally can discharge an employee for no cause, or even for a morally wrong cause, without fear of liability. Bakotich v. Swanson, 91 Wn. App. 311, 314-15, 957 P.2d 275 (1998) (citing Thompson v. St. Regis Paper Co., 102 Wn.2d 219, 225-26, 685 P.2d 1081 (1984)).

An employment contract may be terminated for just cause if (1) an implied agreement for permanent or steady employment exists, or (2) the employee gives consideration to the employer in addition to the contemplated services. Roberts v. Atlantic Richfield Co., 88 Wn.2d 887, 894, 568 P.2d 764 (1977). In order to decide the nature of an employment agreement, the court considers the totality of the circumstances and the intent of both parties. Id.

The existence of an employment agreement, terminable only for cause, cannot be established solely by an employee's subjective understanding or expectations as to his or her employment. Id. `Even an assurance of `steady' employment is not sufficient.' Id. (citing Gensman v. West Coast Power Co., 3 Wn.2d 404, 101 P.2d 316 (1940)). The courts examine the alleged understanding, the intent of the parties, business custom and usage, the nature of the employment, the situation of the parties, and the circumstance of the case to ascertain the terms of the claimed agreement. Id.

In this case, Mr. Lapo relies primarily upon alleged assertions from Mr. Clem that he would `always have a job.' RP at 111. However, statements to this effect are properly characterized as assurances of `steady' employment. Such assurances are insufficient to create an implied contract terminable only for just cause. At trial, Mr. Lapo failed to establish an employment agreement existed that was based on more than his subjective understanding.

Additional Consideration. Alternatively, Mr. Lapo contends that his employment was terminable for cause because he gave consideration in addition to his contemplated services. The consideration must be in addition to required services which results in a detriment to the employee and a benefit to the employer. Roberts, 88 Wn.2d at 895. Longevity of service, foregoing other job opportunities, moving when transfers were ordered, and deferring compensation are not deemed sufficient additional consideration that would create a contract terminable for just cause. Id.

In this case, Mr. Lapo asserts the additional consideration he gave was the work he did in moving the store locations. He contends the move was outside the scope of his regular job duties. Additionally, Mr. Lapo contends he provided additional consideration by foregoing other job opportunities and by loaning money to employees when the store did not make the payroll on time.

First, no evidence was introduced that Mr. Lapo's supervision and work done to move the store location was outside the scope of his job duties as manager of the store. Moreover, Mr. Lapo failed to articulate how moving the store resulted in a detriment to him, since he was paid his normal hourly wage for the time spent on moving the locations. Mr. Lapo's efforts expended to move the store locations do not create additional consideration that would modify the at-will nature of his employment.

Mr. Lapo also contends that he provided additional consideration by foregoing other employment opportunities. However, it is clear that foregoing other jobs is insufficient to create consideration. Roberts, 88 Wn.2d at 895.

Finally, Mr. Lapo contends that he provided additional consideration when he `covered' the payroll for Avalon. However, no evidence exists that this act was requested by Avalon or required by Avalon. Nor does it appear that the act of loaning money to the employees acted to the benefit of the store. And, it is not clear that the making of the loans constituted a detriment to Mr. Lapo. Given the fact that he testified that they were loans, it is likely they were repaid. Mr. Lapo's voluntary act of loaning money to the employees does not arise to sufficient consideration that would support the creation of a terminable for cause only employment relationship.

Mr. Lapo failed to establish that he had an implied contract or that he provided additional consideration to Avalon. The evidence showed that Mr. Lapo was an at-will employee.

The Raise.

Next, Mr. Lapo contends the court erred by granting a directed verdict because he introduced sufficient evidence that the parties entered into an oral contract by which Mr. Clem offered to raise his hourly wage effective October 15, 1995, in exchange for Mr. Lapo's management services. He contends that he continued in his management capacity expecting to get paid at the new rate.

Employment contracts are governed by the same rules as other contracts. See Kloss v. Honeywell, Inc., 77 Wn. App. 294, 890 P.2d 480 (1995) (employment agreement was enforceable despite absence of term regarding price; court properly used equitable powers to infer reasonable rate of compensation). `Mutual assent is required for the formation of a valid contract.' Yakima County (West Valley) Fire Prot. Dist. No. 12 v. City of Yakima, 122 Wn.2d 371, 388, 858 P.2d 245 (1993). Generally, mutual assent takes the form of an offer and acceptance. Id.

`Every contract must be supported by a consideration to be enforceable.' King v. Riveland, 125 Wn.2d 500, 505, 886 P.2d 160 (1994). Consideration is any act, forbearance, creation, modification or destruction of a legal relationship, or return promise given in exchange. Huberdeau v. Desmarais, 79 Wn.2d 432, 439, 486 P.2d 1074 (1971). `Before an act or promise can constitute consideration, it must be bargained for and given in exchange for the promise.' Ward v. Richards Rossano, Inc., 51 Wn. App. 423, 432, 754 P.2d 120 (1988).

In this case, Mr. Lapo fails to introduce sufficient evidence that he and Mr. Clem entered a binding agreement regarding a pay raise. Mr. Lapo testified that Mr. Clem mentioned he wanted Mr. Lapo to receive a higher hourly wage. Yet, he admitted that no specific date had been set for the raise to take effect. In fact, Mr. Lapo testified that he figured Mr. Clem would get around to it when he felt ready or when the store was financially ready for it.

Mr. Lapo points to his employment verification form as proof that he was to receive a raise by October 15. However, Mr. Lapo admits he told the bookkeeper to fill out the form and what to write. It was not proven that the bookkeeper had any authority to bind the company to raise Mr. Lapo's wages. In essence, the form proves nothing other than Mr. Lapo's subjective beliefs about when his raise was to be effective. Thus, he failed to introduce any evidence that Mr. Clem promised him a $2 per hour raise effective October 15.

The Stock.

Mr. Lapo also contends that he was entitled to a gift of 10 percent stock that Mr. Clem promised him under a theory of promissory estoppel.

The requirements for a completed gift are: (1) an intention of the donor to presently give; (2) a subject matter capable of passing by delivery; and (3) an actual delivery. Henderson v. Tagg, 68 Wn.2d 188, 192, 412 P.2d 112 (1966). An incomplete or unexecuted gift confers no right upon the donee; it is unenforceable at law or equity. Oman v. Yates, 70 Wn.2d 181, 186-87, 422 P.2d 489 (1967).

Mr. Lapo admits that Mr. Clem wanted to gift him stock in the corporation. However, according to Mr. Lapo's testimony, Mr. Clem did nothing beyond speaking about the gift. Because the stock certificates were never delivered, the gift was incomplete. Mr. Lapo has no right under which to try to enforce the gift.

Moreover, Mr. Lapo's attempt to enforce the gift under a theory of promissory estoppel should fail. The court has described the five elements of a promissory estoppel claim: (1) a promise, (2) that promisor should reasonably expect to cause the promisee to change his position, and (3) actually causes the promisee to change position, (4) justifiably relying on the promise, (5) in such a manner that injustice can be avoided only by enforcement of the promise. Havens v. CD Plastics, Inc., 124 Wn.2d 158, 171-72, 876 P.2d 435 (1994) (citing Klinke v. Famous Recipe Fried Chicken, Inc., 94 Wn.2d 255, 259 n. 2, 616 P.2d 644 (1980)).

Mr. Lapo argues that he detrimentally relied upon the stock gift by applying for a loan and taking a class. This does not arise to detrimental reliance because he has failed to show he suffered a detriment. Applying for a loan, taking a class, and suffering personal embarrassment simply does not amount to a `change in position' as contemplated by the elements of promissory estoppel. Mr. Lapo has suffered no cognizable harm as a result of applying for a loan, taking a class, and telling his friends something that did not come to fruition.

Mr. Lapo's claim that he is entitled to the promised stock fails for lack of proof.

Vacation and Severance Pay.

Finally, Mr. Lapo contends he was entitled to payment for his accrued vacation hours and severance pay. Mr. Lapo contends that Avalon breached its duty of good faith and fair dealing because it summarily dismissed him, thereby depriving him of the opportunity to take advantage of company policy allowing two weeks paid vacation.

Generally, the right to vacation time is the right to continue to receive one's regular salary even though absent from work for a stated period of time. `It is not, however, a right to continue to work full time, receive full wages, and also receive additional pay in lieu of absenting oneself from employment.' Walters v. Ctr. Elec., Inc., 8 Wn. App. 322, 327, 506 P.2d 883 (1973). This latter arrangement is a right, obtainable contractually through the employment contract, known as the right to receive pay in lieu of or in satisfaction of vacation time. It is a right, therefore, to receive extra compensation. In that sense it is similar to a right to receive overtime pay. Id.

All services rendered by an employee during the period for which he is employed, of a nature similar to those required of him in the course of his regular duties, are presumably paid for by his regular salary. In order to overcome this presumption an employee must establish that the contract of employment, expressly or impliedly, provides for extra compensation. Id.

In this case, Mr. Lapo failed to introduce evidence that his employment agreement specifically provided for the right to extra compensation or pay in lieu of vacation time. As such, he is not entitled to an award for accrued vacation time.

Severance Pay.

Finally, Mr. Lapo contends he is entitled to severance pay. He alleges that Avalon had a policy of paying severance to employees who were terminated without notice or explanation. However, he admitted that upon termination, at least one employee who was on notice that she was going to be fired, received severance pay. Additionally, on cross-examination, Mr. Lapo admitted that several employees were fired and did not receive severance pay. It appears the decision to pay severance pay to departing employees was made on a case-by-case basis. Mr. Lapo introduced insufficient evidence of a company policy regarding severance pay.

In sum, viewing the evidence in the light most favorable to Mr. Lapo, he failed to establish substantial evidence or even a reasonable inference supporting any of his legal theories presented at trial. The trial court did not err by granting a directed verdict.

Affirm.

The majority of the panel has determined this opinion will not be printed in the Washington Appellate Reports, but it will be filed for public record pursuant to RCW 2.06.040.

WE CONCUR: SCHULTHEIS, J., BROWN, J.