MILLER v. RIATA CADILLAC CO

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Docket Number

No. 15277.

Attorney(S)

James R. Warncke, San Antonio, for appellant. Horace P. Shelton, San Antonio, for appellee.

Judges

BARROW, Chief Justice.

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Smart Summary

Factual and Procedural Background

Plaintiff Kenneth F. Miller, employed as a used-car manager for Riata Cadillac Company under an oral contract since February 10, 1968, sought to recover a pro-rata share of an annual bonus for the year 1971. Miller was discharged on October 20, 1971, and claimed entitlement to a portion of the 1971 bonus based on the oral agreement with Riata's president and general manager, Hubert Riley. The bonus was allegedly two and one-half percent of the annual net profits, paid annually in March following the year. Riata contended that the bonus was payable only to the person holding the position on December 25, 1971, and thus Miller was not entitled to any bonus for 1971. Miller’s successor received a pro-rata bonus for the portion of the year he held the position.

Riata moved for summary judgment arguing that the oral contract was unenforceable under the statute of frauds and that Miller admitted the bonus was payable only if he held the position on December 25. The trial court partially denied the summary judgment, ruling the contract was not within the statute of frauds but limiting the trial to the issue of Miller's entitlement to a pro-rata share of the bonus. The court also sustained Riata’s special exception striking Miller’s alternative quantum meruit claim.

Following a jury trial, the jury found that Riley did not have good cause to terminate Miller. Despite this, the trial court rendered a take-nothing judgment non obstante veredicto. Miller appealed, asserting four points of error.

Legal Issues Presented

Whether the trial court erred in disregarding the jury’s finding that the termination was without good cause and in rendering a take-nothing judgment.
Whether Miller was entitled to recover a pro-rata share of the annual bonus despite his discharge before the payment date.
Whether the oral contract for the annual bonus was enforceable or barred by the statute of frauds.
Whether the trial court erred in sustaining a special exception and striking Miller’s alternative plea for recovery on quantum meruit.

Arguments of the Parties

Appellant's Arguments

Miller contended that although he was employed on a month-to-month basis and could be discharged at any time, the discharge was without good cause and should not prejudice his right to a pro-rata bonus for the time he worked in 1971.
He argued the oral contract entitled him to two and one-half percent of the annual net profits as a bonus, payable after the year’s end, and that prior annual bonuses had been paid accordingly.
He sought reversal of the take-nothing judgment and entry of judgment awarding him 293/365ths of the stipulated net profits.
He also challenged the striking of his quantum meruit claim, seeking a remand for further proceedings on that basis.

Appellee's Arguments

Riata argued the oral contract was unenforceable under the statute of frauds because the bonus payment was not to be made within one year, but rather the following March.
Riata asserted that Miller admitted the bonus was payable only if he held the position on December 25, 1971, and since he was discharged earlier, no bonus was owed.
Riata also maintained that the quantum meruit claim was properly stricken.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Scruggs v. George A. Hormel and Company, 464 S.W.2d 730 (Tex.Civ.App. — Dallas 1971, writ ref'd n.r.e.)	Month-to-month employment can be terminated at any time without cause.	Confirmed that Miller’s employment was terminable at will, but discharge without good cause does not bar pro-rata bonus recovery.
Marvin Turner Engineers v. Allen, 326 S.W.2d 200 (Tex.Civ.App. — Austin 1959, no writ)	Employee entitled to recover pro-rata share of bonus upon termination prior to payment date.	Supported the principle that an employee discharged before bonus payment is entitled to a pro-rata bonus.
Haggar Co. v. Rutkiewicz, 405 S.W.2d 462 (Tex.Civ.App. — Waco 1966, writ ref'd n.r.e.)	Employee entitled to share of profits earned up to termination date.	Quoted approvingly to adopt Texas rule allowing pro-rata recovery of bonus upon termination without good cause.
Eisenbeck v. Buttgen, 450 S.W.2d 696 (Tex.Civ.App. — Dallas 1970, no writ)	Recognition of pro-rata recovery of bonuses under Texas law.	Reinforced the principle that employees quitting before fiscal year-end could recover pro-rata bonuses.
Bratcher v. Dozier, 162 Tex. 319, 346 S.W.2d 795 (Tex. 1961)	Statute of frauds applies to contracts not performable within one year.	Applied to hold that the bonus provision was within the statute of frauds and unenforceable as oral agreement.
Chevalier v. Lane's, Inc., 147 Tex. 106, 213 S.W.2d 530 (1948)	Performance under contract does not remove statute of frauds bar if contract not fully performable within one year.	Supported the conclusion that Miller’s bonus contract was unenforceable despite partial performance.
Paschall v. Anderson, 127 Tex. 251, 91 S.W.2d 1050 (1936)	Statute of frauds principles on contracts not performable within one year.	Used to reinforce the court’s conclusion regarding the statute of frauds.
Jackman v. Anheuser-Busch, Inc., 162 S.W.2d 744 (Tex.Civ.App. — Dallas 1942, writ ref'd)	Statute of frauds bars certain oral contracts.	Further supported the court’s ruling on unenforceability of the bonus contract.
First National Life Insurance Co. v. Herring, 318 S.W.2d 119 (Tex.Civ.App. — Waco 1958, no writ)	Preservation of error requires proper motions and trial procedure.	Applied to hold Miller’s complaint about striking of quantum meruit claim was not properly preserved for appeal.

Court's Reasoning and Analysis

The court acknowledged Miller’s employment was terminable at will, but reasoned that discharge without good cause does not preclude an employee from recovering a pro-rata share of a promised annual bonus for the time actually worked. The court adopted the rule that an employee discharged without good cause before the specified payment date is entitled to a pro-rata bonus.

However, the court found that the oral contract for the bonus was not enforceable under the statute of frauds because the bonus was payable after the year ended, beyond one year of contract formation, and full performance was not possible within one year. The court cited Texas precedent holding that partial performance does not remove the contract from the statute of frauds.

Regarding Miller’s alternative quantum meruit claim, the court held that this issue was not properly preserved for appeal because Miller did not file a motion for new trial after the special exception was sustained. Consequently, the court did not consider this point.

Holding and Implications

The judgment of the trial court is affirmed.

The court’s decision directly results in Miller receiving no recovery for the 1971 bonus, as the oral contract is unenforceable under the statute of frauds despite the jury’s favorable finding on wrongful termination. The ruling clarifies that under Texas law, while an employee discharged without good cause may be entitled to a pro-rata bonus, the enforceability of such bonus agreements is constrained by the statute of frauds. No new precedent beyond the application of existing statutes and case law was established, and the quantum meruit claim was not reviewed due to procedural default.

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Kenneth F. MILLER, Appellant, v. RIATA CADILLAC COMPANY, Appellee.

BARROW, Chief Justice.

Plaintiff, Kenneth F. Miller, brought this suit to recover a pro-rata share of an annual bonus allegedly owed under his oral contract of employment as used-car manager for Riata Cadillac Company. Miller was discharged on October 20, 1971, and seeks to recover a pro-rata share of the 1971 bonus. A partial summary judgment was granted defendant, and a take-nothing judgment was rendered non obstante veredicto after a trial on the merits.

Miller asserts four assignments of error in this appeal. The first three points complain of the trial court's action in disregarding the jury finding that the general manager did not have good cause to terminate Miller's employment and in rendering a take-nothing judgment. Under these points, Miller urges that the take-nothing judgment should be reversed and judgment here rendered for appellant, whereby he recover 293/365th of the stipulated net profits owed the used car manager. His fourth point complains of the trial court's action in sustaining a special exception to his alternative plea for recovery on a quantum meruit and under this point, he seeks a remand.

The parties stipulated that two and one-half percent of the net profits for 1971 were $15,519.33.

Miller was employed as a used-car manager for Riata on February 10, 1968, pursuant to an oral agreement with Hubert Riley, president and general manager of Riata. Under the terms of this agreement, Miller was to receive a monthly salary of $350.00, plus a monthly bonus based on the gross profits of the new and used-car departments under a fixed graduated scale. These emoluments were paid in full up to the termination of Miller's employment, whereby he received the sum of $37,455.07. Miller alleged that a bonus of two and one-half percent of the annual net profits of appellee was to be paid the used-car manager at the end of March following such year. Annual bonuses were paid to him for the years 1968, 1969, and 1970. Riata contended that such bonus was payable to the person holding such position on December 25, and since Miller left on October 20, 1971, nothing was owed him for 1971. Plaintiff's successor received such bonus, but in accordance with the terms of the agreement, received same only on a pro-rata basis for the period he had held such position.

Riata sought a summary judgment on its plea that the oral contract sought to be enforced came within the statute of frauds, and was, therefore, unenforceable. It also urged that Miller had admitted in his oral deposition that the bonus was payable only if he held the position of used-car manager on December 25. A partial summary judgment was entered, whereby the trial court found that the contract was not within the statute of frauds, and ordered that the cause be tried only on the question of whether Miller was entitled to a proportionate share of the annual bonus for the proporitionate part of the year he actually worked for Riata. The court also sustained Riata's special exception to Miller's alternative plea for recovery on a quantum meruit and ordered same stricken.

Section 26.01, Business(s*)(s*)Commerce(s*)Code, Tex.Rev.Civ.Stat.Ann.; Article 3995(5), Tex.Rev.Civ.Stat.Ann.

The jury found, in response to the only issue submitted, that Riley did not have good cause to terminate the employment of Miller on October 20, 1971. Miller concedes that he was employed on a month-to-month basis, or for an indefinite period of time, and, therefore, could be discharged for any reason at any time. See Scruggs v. George A. Hormel and Company, 464 S.W.2d 730 (Tex.Civ.App. — Dallas 1971, writ ref'd n.r.e.). He urges, however, that Riata's right to discharge is without prejudice to his own right to receive a pro-rata part of the promised annual bonus for the period he had actually worked since he was discharged through no fault of his own.

Although commonly referred to as a "bonus," a general bonus, profit-sharing, or other incentive plan forms an integral part of many employer-employee contracts and is binding upon the employer as soon as the employee has rendered any substantial service under same. Marvin Turner Engineers v. Allen, 326 S.W.2d 200 (Tex.Civ.App. — Austin 1959, no writ); Corbin on Contracts, Volume 1A, Section 153 (1963). A more difficult question, and one on which there is a division of authority, is the effect on such bonus of the termination of the employee's services, either voluntarily or involuntarily, prior to the time specified for the distribution of the bonus. See Anno.: Bonus or Profit-Sharing Plan, 81 A.L.R.2d 1066, 1069. We have found no Texas decision which squarely considered this question. Nevertheless, the only Texas authorities which have considered the subject permitted the employee to recover on a pro-rata basis where the employment was terminated prior to the time specified for payment of the bonus.

In Haggar Co. v. Rutkiewicz, 405 S.W.2d 462 (Tex.Civ.App. — Waco 1966, writ ref'd n.r.e.), the court, although it upheld a jury finding that the employer agreed to pay employee for his services for time less than a year, quoted with approval the rule from 56 C.J.S. Master and Servant § 112, p. 554, as follows:

"Ordinarily an employee entitled to a per cent of the profits may on termination of his employment within a compensation period recover his share of profits earned up to the date of termination." This rule was followed by the Fifth Circuit in determining the rights under Texas law of two employees who quit their employment before the end of the fiscal year when a profit-sharing bonus was to be computed. In Marvin Turner Engineers v. Allen, supra, an employee was permitted to recover 11/12th of a bonus where he was discharged in early December. See also Eisenbeck v. Buttgen, 450 S.W.2d 696 (Tex.Civ.App. — Dallas 1970, no writ).

We conclude, and here adopt as the Texas rule, that an employee who is discharged without good cause prior to the time specified for payment of a bonus is entitled to recover a pro-rata part of such bonus for the period he actually worked.

Riata urges, however, that in any event, the bonus provision of the oral contact could not be fully performed within one year and, therefore, was not enforceable under the statute of frauds. Miller specifically alleged that the bonus was not payable until March following the end of such calendar year. Presumably, time would be needed for an audit to determine the net profits. Thus, the full performance of the contract could not be had within one year, and the provision comes within the terms of the statute. Bratcher v. Dozier, 162 Tex. 319, 346 S.W.2d 795 (Tex. 1961); 147 Tex. 106, Chevalier v. Lane's, Inc., 213 S.W.2d 530 (1948); 26 Tex.Jur.2d, Statute of Frauds, Section 32 (1961). Nor is this rule changed by Miller's performance under the contract. Chevalier v. Lane's, Inc., supra; Paschall v. Anderson, 127 Tex. 251, 91 S.W.2d 1050 (1936); Jackman v. Anheuser-Busch, Inc., 162 S.W.2d 744 (Tex.Civ.App. — Dallas 1942, writ ref'd). The trial court did not err in concluding that Riata's promise to pay a profit-sharing bonus in March of 1972 for Miller's services in 1971 is not enforceable. Miller's first three points are overruled.

Miller's final point complains of the trial court's action in sustaining Riata's special exception and striking his alternative plea for recovery on a quantum meruit. Such point has not been properly preserved for review on appeal. This was a jury trial, and Miller did not file a motion for new trial. He is, therefore, limited on appeal to his complaint of the court's action in rendering judgment non obstante veredicto. Rules 324 and 325, Texas Rules of Civil Procedure. He may not complain of the court's action in sustaining Riata's special exception. First National Life Insurance Co. v. Herring, 318 S.W.2d 119 (Tex.Civ.App. — Waco 1958, no writ).

The judgment of the trial court is affirmed.