Montgomery Ward & Co. v. Guignet

Decision Date22 December 1942
Docket Number16874.
Citation45 N.E.2d 337,112 Ind.App. 661
CourtIndiana Appellate Court

John A. Barr and L. E. Oliphant, Jr., both of Chicago, Ill., Ora L. Wildermuth, of Gary, and Francis H. Monek, of Chicago Ill., for appellant.

Thorpe Bamber & Harrison, of Hammond, for appellee.


The appellee on May 5, 1938, brought this action against the appellant to recover damages. His complaint was in two paragraphs. The first paragraph of complaint alleged generally that the appellant was a corporation authorized to do business in Indiana, and was engaged in the operation of many retail stores for the sale of merchandise. The complaint alleged that for the purpose of stimulating the activities of store managers employed by the appellant, it had adopted and maintained a bonus plan in favor of such store managers which provided that they should receive at the end of each year, in addition to their stipulated salary, a bonus in the amount of eight per cent of the net profit of the store so operated by such manager.

The appellee alleged that on the 29th day of February, 1936, he was employed as store manager for appellant store in Jackson Michigan. Under his management for the year 1936 such store showed a net profit of $21,000, and for 1937 a net profit of $25,000.

The complaint further alleged that on the 30th day of October, 1937, and before the end of the fiscal year of 1937, the appellant wrongfully and without cause or reason terminated the appellee's employment, and refused to pay him his bonus for the year 1937. He accordingly prayed judgment for $2,000.

The second paragraph of the complaint alleged substantially the same facts but contained the additional averment that it was mutually agreed between the appellee and the appellant at the time he was employed that he would be permanently employed so long as he well and faithfully performed all of his duties as store manager. The appellee alleged that this contract of permanent employment has been wrongfully breached, for which breach he prays damages in the sum of $50,000.

To this complaint, the appellant filed an answer in two paragraphs. The first paragraph was in general denial, and the second paragraph was by way of set-off or counterclaim. This paragraph alleged that the appellee was indebted to the appellant for $199.10 for merchandise purchased by him, and for which amount they prayed judgment.

Replies of general denial to this affirmative paragraph of answer closed the issues. The case was submitted to a jury for trial, and at the close of the evidence the appellant moved for a directed verdict. This motion was overruled, and the jury, after being instructed by the court, returned a verdict for the appellee on paragraph one of his complaint and assessed his damages in the sum of $1,734. The jury also returned a verdict on paragraph two of the appellee's complaint, and assessed his damages in the sum of $2,412. The court instructed the jury to return a verdict for the appellant on its counterclaim in the sum of $199.10, which action is unchallenged.

A motion for new trial was filed by the appellant and overruled, and this appeal has been perfected. The error assigned on appeal is: The court erred in overruling the appellant's motion for a new trial.

Under this assignment of error, the appellant contends that the verdict of the jury is not sustained by sufficient evidence.

In support of this assignment, the appellant contends that the only right of the appellee to recover a bonus is based upon the provisions of the appellant's store operations manual, which was the only bonus plan in operation during the period of appellee's employment. The appellant accordingly contends that under the provisions of this manual the appellee cannot recover a bonus in the event his employment is terminated during the fiscal year. The provisions of the store operations manual, as offered in evidence, disclosed the following clauses:

"'c. No rights to a fixed or definite term of employment are conferred by the bonus plan. The company reserves the right to terminate employment without advance notice, whether such termination be for cause or otherwise.
"'d. If the Manager's services are terminated either by the company or by the manager, the manager forfeits his right to a bonus for the entire year in which his services are terminated.
"'k. No bonus arrangements other than the foregoing shall be binding on the company unless in writing and bearing written approval of an officer of the company."'

As a part of the appellee's evidence in support of his case in chief, the parties then entered into the following stipulation:

"'It is stipulated and agreed between the counsel that the defendant has a bonus plan as set out in its Store Operating Manual and that, according to said plan, the bonus as applicable to the Jackson, Michigan, store would be figured on the basis of 8% of 85% of the net profit of the store for each fiscal year; and if the plaintiff is entitled to a bonus in this case, the bonus would be computed in accordance with the above percentages."'

In the light of the provisions of this operations manual, and in the light of the stipulation, the question presented to us is whether or not there is any evidence which warranted the jury in finding that the appellee was entitled to a bonus for the fiscal year 1937 since he was discharged October 30th of that year.

The appellee contends that this bonus plan was, in legal effect, a contract to pay additional compensation, and not a gratuity, and is, therefore, enforceable as a part of the wages earned when the employee is wrongfully discharged. Conceding for the sake of argument that the provisions of the plan, as adopted by the appellant for the payment of a bonus, amount to additional compensation, yet the right of the appellee to recover such bonus must be determined from a study of all the provisions of the adopted plan. The terms of this plan were known to the appellee during the course of his employment, and when the appellant's employing agent discussed the matter of the payment of a bonus, we must assume that it was the bonus plan as set forth in the store operations manual.

As was said by this court in the case of Orton & Steinbrenner Co. v. Miltonberger, 1920, 74 Ind.App. 462, 129 N.E. 47, 49: "When the superintendent promised a bonus, he must be understood to have meant a bonus in such amount as the method adopted by appellant for its computation would produce, and appellee, by entering the service and performing the labor for which he was employed, accepted such terms. There is no challenge of appellant's method of determining the amount of the bonus, but simply that under that method appellee should receive his just proportion."

Having become bound by the provisions governing the payment of the bonus, the appellee must meet the conditions stipulated in this plan before he can share in its benefits. One of these conditions required that the manager should continue in the service of the employer for the entire year in order to participate in the profits of the business. In other words, the right of the manager to a bonus was conditioned upon his continuous service for the entire year in which the profits of the business were computed. In our opinion, this condition was not unconscionable in its nature and was not contrary to public policy.

The case at bar is similar in many respects to the case of the National Manufacture & Stores Corp. v. Whitman, 4 Cir., 1938, 93 F.2d 829, 831. In this case, appellee sued to recover a manager's bonus which he claimed to be due him as manager of appellant's store at Spartanburg, S. C. In this case, as in the case at bar, store managers were given a bonus provided they remained in the employment of the corporation for the full year, beginning June 1st. The appellee left their employment without finishing the year's work, and sought to recover his proportionate share of the bonus. The court said:

"The plaintiff's original contract of employment with the defendant contained the agreements that either party could terminate the contract at will. In the absence of fraud or bad faith such an agreement is binding. The bonus agreement relied upon by the plaintiff as a basis for recovery must be read as a whole and, when so read, clearly shows that the bonus offer was to be effective only in the event the plaintiff completed the year as manager of the Spartanburg store and in the absence of bad faith or

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