Danzer v. Professional Insurors, Inc.

• Decision Date: 10 April 1984
• Docket Number: No. 15033,15033
• Citation: 1984 NMSC 46,101 N.M. 178,679 P.2d 1276
• Parties: Joseph H. DANZER and Elizabeth Danzer, his wife, Plaintiffs-Appellees, v. PROFESSIONAL INSURORS, INC., d/b/a Bundy, Seligman & Thomas Agency, Defendant-Appellant.
• Court: New Mexico Supreme Court

Page 1276

679 P.2d 1276

101 N.M. 178

Joseph H. DANZER and Elizabeth Danzer, his wife, Plaintiffs-Appellees, v. PROFESSIONAL INSURORS, INC., d/b/a Bundy, Seligman & Thomas

Agency, Defendant-Appellant.

No. 15033.

Supreme Court of New Mexico.

April 10, 1984.

Kenneth R. Wagner, Albuquerque, for plaintiffs-appellees

Daniel E. Duncan, Albuquerque, for defendant-appellant.

OPINION

WALTERS, Justice.

Appellant Professional Insurors, Inc. (Insurors) and Joseph Danzer (Danzer) entered into a written employment contract on April 1, 1976. Insurors terminated Danzer's employment on September 17, 1981. Appellees Danzer and his wife Elizabeth brought an action for breach of the employment agreement, and were awarded $51,651.00 following a non-jury trial.

In challenging the damages allowed by the trial court, Insurors couches all of its points on appeal in terms of certain findings and conclusions being unsupported by substantial evidence. Those points are susceptible of having framed five issues: (1) whether Article IV of the employment agreement regarding compensation is ambiguous; (2) whether Danzer's employment was terminated for good cause, and the effect of that determination; (3) whether Insurors' oral modification of Danzer's commission rate is enforceable; (4) whether Danzer satisfied his burden of proof that he was entitled to payment for a two-week vacation he claimed he had not taken in 1981; and (5) whether Insurors' counterclaim for compensatory damages and an accounting was properly denied. We affirm in part and reverse in part.

At the outset, we address Danzer's argument, in which he cites Gish v. Hart, 75 N.M. 765, 411 P.2d 349 (1966), and Michael v. Bauman, 76 N.M. 225, 413 P.2d 888 (1966), that Insurors' Brief in Chief violates NMSA 1978, Civ.App.R. 9(d) (Cum.Supp.1983). Rule 9(d) requires a party contending that a finding of fact is not supported by substantial evidence to include proper references to the substance of all of the evidence bearing on the proposition. Insurors did not cite every relevant portion of the transcript on the questions raised, but it did refer to a substantial portion of material evidence. Insurors' substantial compliance is easily distinguished from the total disregard of the rule in Gish and Michael. We construe the rules of appellate procedure liberally so that causes on appeal may be determined on their merits. Maynard v. Western Bank, 99 N.M. 135, 654 P.2d 1035 (1982). Insurors' deficiencies in citing to the evidence in the record are not immoderate.

1) Ambiguity of the Agreement

The employment agreement was entered into on April 1, 1976. Article IV of that agreement provides as follows:

COMPENSATION OF EMPLOYEE. Employer shall pay employee, and employee shall accept from employer, in full payment for employee's services hereunder compensation determined as follows:

1. [$7,200.00 on an annual basis for administrative duties]

2. For new and renewal business in employee's commercial casualty property book of business, employer shall compensate employee at a rate of twenty-five per cent (25%) of the commissions on such business. It is understood and agreed by the parties hereto that the employee's share of commission income as provided herein is based upon his production of new and renewal business in his commercial casualty property book of business during the prior year, such that his share of commission income for the period from April 1, 1976, through December 31, 1976, for example, is based upon production figures as of December 25, 1975. The percentage of commissions payable to employee by employer shall be adjusted on December 31, 1976, and on December 31 of each year thereafter.

The compensation as set out herein shall be payable semi-monthly on the 15th day and the 30th day of each month while this Agreement shall be in force.

* * *

* * *

The trial court concluded that Article IV was ambiguous and found that, although the employee was paid a percentage of the commissions produced, as a part of his salary in the year after the commissions were generated, the employee's interest in the commission became vested in the prior year at the time the commissions were generated. We do not agree that the article was ambiguous or that the trial court properly interpreted what was unambiguous.

Whether a contract is ambiguous is a question of law. Sierra Blanca Sales Co., Inc. v. Newco Industries, Inc., 84 N.M. 524, 505 P.2d 867 (Ct.App.1972). Article IV plainly provides that the employee's compensation in a given year consists of two parts, one part being a flat administrative salary of $7,200, and the other part being based on a percentage of commissions produced by the employer for new and renewal business during the prior year. Nowhere does Article IV provide that commissions are "earned" in the prior year, or that the employee will be paid the amounts that have been generated as commissions. It refers to the prior year's commissions only as a basis for calculating the current year's compensation over and above the $7,200.

Because we hold that Article IV is not ambiguous but, rather, that it establishes a base for computing a portion of Danzer's monthly income in the ensuing year, it is apparent that the trial court erred in awarding Danzer income, based on the commission percentage, for the months of October, November and December, 1981, and January, 1982, which were months following Danzer's termination in September, 1981; and in awarding $20,000 for commissions "earned" during the fiscal year of February 1, 1981 through January 31, 1982.

Article IV provides for semi-monthly payments of compensation "while this Agreement shall be in force." The commission rate for 1981 was calculated to be $2,880 per month. Without commenting here on the correctness of the 1981 rate, clearly Danzer was not entitled to $2,880 commission-calculated salary per month when he was not employed by Insurors. The $12,960 award representing commission salary for four months of the 1981-82 fiscal year after Danzer's termination was erroneous.

Likewise, Danzer did not "earn" commissions of $20,000 as a result of business generated by him during the 1981-82 fiscal year. $20,000, representing 25% of commissions on business generated by Danzer in 1981-82, would have been the amount of the second part of Danzer's compensation in 1982, payable semi-monthly, if the agreement had remained in force and Danzer had continued his employment with Insurors in 1982. He did not. Consequently, the amount of insurance sold by Danzer during the fiscal year from February 1, 1981, until his termination in September, 1981, and the commissions accruing thereon, were never brought into play as a basis for calculating Danzer's 1982 salary. The award of $20,000 to Danzer was error.

2. Good Cause for Termination

The trial court found as follows:

6. Danzer duly performed all terms and conditions required of him by the Employment Agreement.

7. While Danzer was an employee of the Defendant, he transferred certain business and accounts to one of their insurance agencies with whom he subsequently became associated but did this solely for the benefit of the Defendant.

8. Danzer never interferred [sic] with any of the Defendant's contractual relationships and was always an excellent employee.

9. Danzer was terminated without good cause.

16. Pursuant to Article XIV of the Employment Agreement, Danzer is entitled to termination pay for 30 days in the sum of $600.

The pertinent conclusions are:

4. Danzer duly performed all terms and conditions required of him by the Employment Agreement.

5. Danzer was terminated without good cause and therefore the covenant not to compete provided in Article VIII of Employment Agreement is not enforceable.

"Good cause" is not a necessary precondition to either party's termination of the agreement. Article XIV provides however, that unless there is a violation of the terms of the agreement by the employee, the employee is entitled to thirty days' compensation from the time of termination. Article XIV also provides that if the employee is terminated "without good cause," then the employee will not be bound by Article VIII, which is a covenant not to compete.

The trial court's finding that Danzer did not violate the terms of the agreement is supported by substantial evidence. Although Danzer acknowledged that he had transferred business from Insurors to a second agency against the express direction of Insurors, there is substantial evidence that Insurors knew of those transfers, acquiesced in them, benefitted from them, and thus waived any claim that Danzer's conduct was unacceptable or in violation of the agreement.

Moreover, Danzer's employer testified that Danzer's employment was terminated because Danzer was not profitable and because Danzer failed to deliver the accounts of another agency upon the employer's request. The employer said he had requested the records over an extensive period during 1981; Danzer testified he had been asked for them on September 14th, and delivered them on September 15th. There is substantial evidence in the record that Danzer was an excellent insurance agent and at least as profitable as most of Insuror's other agents. There is also substantial evidence that Danzer made every reasonable attempt to comply with the order to deliver the accounts in September, 1981, and was unable to do so immediately. Danzer was required by the agreement to perform his duties "to the reasonable satisfaction" (our emphasis) of his employer.

Our view of the trial court's conclusion that Danzer was "terminated without good cause" requires a definition of "good cause." This court has not previously been called upon to interpret a "termination for good cause" provision in an employment contract. The Court of Appeals has stated that "an employer may discharge an employee where he is dissatisfied in good faith with services of the employee and the contract does not...