Penzell v. Taylor

Decision Date06 September 1991
Docket NumberNo. 1-90-1340,1-90-1340
Citation162 Ill.Dec. 142,579 N.E.2d 956,219 Ill.App.3d 680
Parties, 162 Ill.Dec. 142 Michael E. PENZELL, Plaintiff-Appellee, v. Katherine S. TAYLOR, Defendant-Counterplaintiff-Appellant (Michael E. Penzell, Plaintiff-Counterdefendant-Appellee; Satellite Music Network, Inc., Counterdefendant-Appellee).
CourtUnited States Appellate Court of Illinois

Law Offices of George E. Weaver, Chicago (George E. Weaver and Robert C. Gislason, of counsel), for Katherine S. Taylor.

Katz Randall & Weinberg, Chicago (Lawrence M. Karlin, of counsel), for Michael Penzell.

Skadden, Arps, Slate, Meagher & Flom, Chicago (David E. Springer, David W. Hansen, Rawn H. Reinhard, of counsel), for Satellite Music Network.

Justice McNAMARA delivered the opinion of the court:

Plaintiff, Michael E. Penzell, filed a single-count complaint against defendant, Katherine S. Taylor, seeking recovery of $15,000 for payment on a written demand promissory note. Taylor filed a counterclaim seeking to enforce an alleged guarantee made by Penzell that Taylor would earn $200,000 during her first year of employment with Satellite Music Network, Inc. (Satellite) consisting of counts sounding in fraud, breach of contract, breach of warranty of authority and breach of guaranty agreement against Penzell. Taylor also filed suit against Satellite, in which she sought damages for fraud, breach of contract and quantum meruit for commissions allegedly earned in the procurement of advertising for Sears Roebuck & Co. (Sears). The trial court dismissed the breach of guaranty agreement against Penzell for failure to state a cause of action. The trial court also granted summary judgment in favor of Penzell and Satellite on all remaining counts. Taylor appeals. (Taylor has subsequently paid the $15,000 promissory note to Penzell, and that action is not at issue in this appeal).

The record reveals the following relevant facts. Taylor had been employed for several years by ABC Television Network (ABC) as an account executive. Penzell, who previously worked for ABC, was employed as vice-president and central division sales manager for Satellite. In April 1986, Penzell contacted Taylor and inquired whether she was interested in working for Satellite as an account executive. Taylor indicated to Penzell that she would have to earn more money at Satellite than she made at ABC, which was approximately $85,000 to $100,000 on the basis of salary and commission. (In 1984, Taylor's earnings at ABC were $95,276, and $80,981 in 1985.) ABC did not guarantee Taylor's commission income, but it did estimate her prospective earnings each year.

Penzell produced his W-2 form for 1985 which showed income over $300,000 for the purpose of demonstrating to Taylor the earning potential at Satellite. Penzell obtained authority to hire Taylor from his boss, Mel Diamond, and agreed that Taylor would be compensated at a 5% commission rate. On April 10, 1986, Taylor signed a letter from Penzell indicating that she would earn sales commissions at the rate of 5% against net sales after agency commission. The letter further stated that for the first three months of employment, Taylor was to receive a bimonthly draw of $3,750 which would then decrease to $2,708. The letter did not include language indicating any salary guarantees.

Taylor requested Penzell to memorialize the employment agreement in writing. Penzell provided Taylor with a letter received in April 1986 which states in relevant part:

"This reflects our personal and private understanding that I will make best efforts to structure assignments to provide you with a clear shot at annual earnings at the rate of $200,000 gross at Satellite Music Network. Of course, the effectiveness of your efforts is the other part of the equation."

Penzell also wrote a letter upon Taylor's request to Tom Dorazil at Lumbermen's Investment Corporation. (Dorazil was Taylor's boyfriend). In that letter dated April 24, 1986, Penzell stated that Satellite had hired Taylor as an account executive with guaranteed earnings for the next calendar year in the amount of $200,000, and that he anticipated a long and profitable association. On May 5, 1986, Penzell signed a request for verification of employment from Columbia National Bank of Chicago for a mortgage for Taylor, in which he listed her monthly income as $16,666.67.

On May 1, 1986, Taylor left ABC and began employment with Satellite. Upon commencing employment, Taylor signed an insurance form listing her annual salary as $65,000. Penzell informed Taylor of the general geographic territory for which she would be responsible, as well as the account assignments.

In July 1986, Taylor reviewed the accounts that were assigned to her in Penzell's billing box. At that time, Taylor determined that Penzell had misled her because the accounts assigned to her were not going to generate $200,000 in commissions. Taylor did not speak to Diamond or anyone else at Satellite about the alleged guarantee.

Taylor confronted Penzell after reviewing the account books, and told him that she was experiencing financial difficulty. Penzell informed Taylor that she would be able to increase her earnings because he was going to leave Satellite shortly.

In October 1986 Taylor approached Penzell and requested a loan because she could not meet her car, credit card, and mortgage payments on the house in Barrington she had purchased shortly before beginning employment with Satellite. Penzell lent $15,000 in cash to Taylor, and she signed a note stating that repayment was upon demand. This was the loan which precipitated the present action.

In January 1987, Taylor met with Diamond and John Tyler, also a Satellite executive. At that meeting, Tyler and Diamond assured Taylor that they wanted her to be happy, and that she would make a lot of money. Taylor was informed that she was no longer reporting to Penzell, but would report directly to Diamond.

Diamond apologized for all the confusion, and told her that she would be handling the Sears account. Diamond told Taylor that he would forgive the $30,000 draw balance that she accumulated through January 26, 1987, and that she would now receive 10% commission on all orders that she wrote.

During the course of that meeting, Taylor showed Diamond a copy of the letter Penzell had written to her in April 1986, and told him that the salary of $200,000 promised by Penzell had not been honored. Diamond replied that "there was nothing that he could do about it." Taylor had no further conversations with either Diamond or Tyler about the $200,000 promise. Taylor thought that she could make sufficient money in the future in order to attain the $200,000 yearly salary.

In April 1987 Taylor was promoted to Penzell's former position as sales manager and maintained the same rate of commission. After her promotion, Taylor interviewed and subsequently hired Marilyn Cilo Cross as a sales representative. Taylor told Cross that she would receive a draw of $40,000, and that her potential income including commissions would be $75,000. Taylor stated that she made this estimate after conducting an extensive study of Satellite's past billing history, and that it was not a guarantee.

Taylor's employment with Satellite ended on December 31, 1987, at which time Satellite closed the Chicago office. Taylor was paid commissions on all ads that ran during the time she was employed by Satellite. The record reflects that Taylor earned $155,000 at Satellite during 1987.

In his deposition, Penzell stated that he told Taylor that if she worked real hard she might be able to make between $100,000 and $200,000 or more per year, depending on a number of factors. Penzell informed Taylor at their initial meeting that a "guarantee was out of the question" and that he could not officially represent to her that she could make $200,000 per year without obtaining approval of the guarantee from Diamond or Tyler. Penzell further stated that the phrase "personal and private understanding," found in his April 1986 note to Taylor meant that it was purely personal and was outside of his competence as a vice-president of Satellite. Penzell also said that he was not truthful at the time he wrote the letter to Dorazil because Taylor's income was not guaranteed by Satellite at $200,000 or any other figure. Satellite never guaranteed an income to anyone in the sales department.

Penzell acknowledged that the amount of Sears' advertising substantially increased after Taylor began her employment with Satellite; however, it could not be attributed solely to her efforts. Penzell was also heavily involved in the negotiations on the account, and much of the work took place with higher level employees such as himself, Diamond and Tyler. According to Penzell, commissions were earned for an ad after it was run and had been billed, not when the business was written. Penzell stated that it was customary in their industry that ads which were written before a person left employment, but were not billed, did not earn commissions. Penzell further stated that Taylor was aware of this practice, which was common knowledge at Satellite.

Taylor stated in her deposition that the only reason that she left ABC was because Satellite guaranteed her income in the amount of $200,000 for one year, unless and until such time as she might be discharged for cause. Taylor stated that she expected Satellite to return to her the difference between $200,000 and her actual earnings. Her income after April 20, 1987 was not guaranteed at any level.

Taylor stated that she was paid commissions only after an ad ran while employed at both ABC and Satellite, and that she believed that was standard for the industry. When Taylor left her previous position, she did not receive commissions for ads that ran after the time she was no longer employed at ABC.

On appeal, Taylor contends that the trial court erred in granting summary judgment in favor of...

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