Abeyta v. Superior Court

• Citation: 17 Cal.App.4th 1037,21 Cal.Rptr.2d 680
• Decision Date: 06 August 1993
• Docket Number: No. B071253,B071253
• Court: California Court of Appeals
• Parties: Mike ABEYTA, Petitioner, v. SUPERIOR COURT of California for the County of Los Angeles, Respondent; JOLENE COMPANY, INC., et al., Real Parties in Interest.

Page 680

21 Cal.Rptr.2d 680

17 Cal.App.4th 1037

Mike ABEYTA, Petitioner, v. SUPERIOR COURT of California for the County of Los Angeles, Respondent JOLENE COMPANY, INC., et al., Real Parties in Interest.

No. B071253.

Court of Appeal, Second District, Division 7, California.

Aug. 6, 1993.

Rehearing Denied Aug. 31, 1993.

Williams & Kilkowski and James M. Kilkowski, Los Angeles, for petitioner.

No appearance for respondent.

Iverson, Yoakum, Papiano & Hatch, John M. Garrick and Mark A. Pearson, Los Angeles, for real parties in interest.

JOHNSON, Associate Justice.

In this writ proceeding we clarify an issue which evidently has been causing some confusion in certain trial courts. We construe the Supreme Court's Foley decision (Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 765 P.2d 373) to exempt from the statute of frauds oral employment contracts which are terminable within one year even when those contracts provide the term of employment is for a specific duration longer than one year. Although we do not regard this as a close question, we publish this opinion solely for the purpose of providing guidance to trial courts on what apparently is proving to be a troublesome issue.

FACTS AND PROCEEDINGS BELOW

This case turns on a narrow issue requiring interpretation of the statute of frauds. Accordingly, we only provide a brief summary of the facts in order to place this narrow issue in context.

According to the allegations of petitioner Mike Abeyta's complaint, real party in interest Jolene Company, Inc. (Jolene) is a dress manufacturer and distributor. In November 1989, Jolene and Abeyta entered into an oral employment contract. This contract called for Abeyta to serve as national sales manager and as sales representative for Jolene in certain territories. He was expected to hire most of the sales staff. Jolene agreed to pay him commissions on his personal sales and on sales made by the sales staff he was supervising. Under this oral contract, Abeyta would be entitled to a 10 percent stock ownership in Jolene if and when Jolene's sales reached $12 million a year.

Also according to petitioner's complaint, Jolene terminated Abeyta as sales manager in March 1991. Prior to that time Jolene allegedly had failed to pay his commissions on sales made during his tenure as sales manager.

Abeyta filed suit against Jolene and some of its officers based on alleged breaches of the oral employment contract and related causes of action. The second amended complaint was filed January 31, 1991, and serves as the pleading upon which this case was brought to trial. It alleges ten causes of action but most of these counts depend on the validity of the oral employment contract entered into in November 1989.

A court trial began in the Los Angeles Superior Court on September 14, 1992. In his opening statement, Abeyta's counsel described the oral contract as follows:

"As a result [of preliminary negotiations] they entered into an oral agreement of an indefinite duration that wasn't terminable except for cause prior to a three-year period. Cause being the ordinary causes in commercial life, dishonesty, immorality, failure to perform. For example, if he says I'll organize a sales force and doesn't proceed to hire anybody for six months, Jolene had the right to terminate him. He's not entitled to two percent commission for all the orders which comes in if he does nothing.

"Similarly, at the end of three years there was no termination right unless the shippings had not reached a million dollars a month net shippings...." (Italics added.)

At the conclusion of this opening statement, real parties in interest moved for nonsuit. This motion was based on a contention the oral employment contract violated the statute of frauds because it was not to be performed within one year. After considerable argument, the trial court took the motion under submission. Later and after further argument the court granted nonsuit as to several counts which depended on the validity of the oral employment contract. The court also granted Abeyta's request to stay trial of the remaining counts while he sought relief in the appellate courts.

On November 12, 1992, Abeyta filed his petition for writ of mandate in this court. On November 13, 1992, this court summarily denied the writ. On January 21, 1993, the California Supreme Court granted Abeyta's petition for review and ordered the matter transferred to this court. The Supreme Court ordered us to vacate our denial of the writ and to issue an alternative writ. In its order, the high court also cited its decision in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 671-675, 254 Cal.Rptr. 211, 765 P.2d 373. On February 3, 1993, we issued an alternative writ.

DISCUSSION

The standard of review for a nonsuit after conclusion of the opening statement is well settled. Both the trial court in its initial decision and the appellate court on review of that decision must accept all facts asserted in the opening statement as true and must indulge every legitimate inference which may be drawn from those facts. (Russell v. Soldinger (1976) 59 Cal.App.3d 633, 640, 131 Cal.Rptr. 145; Timmsen v. Forest E. Olsen, Inc. (1970) 6 Cal.App.3d 860, 868, 86 Cal.Rptr. 359.) A nonsuit at this early stage of the proceedings is disfavored. (Baber v. Napa State Hospital (1989) 209 Cal.App.3d 213, 217, 257 Cal.Rptr. 55.) It can only be upheld on appeal if, after accepting all the asserted facts as true and indulging every legitimate inference in favor of plaintiff, it can be said those facts and inferences lead inexorably to the conclusion plaintiff cannot establish an essential element of its cause of action or has inadvertently established uncontrovertible proof of an affirmative defense. (Brimmer v. California Charter Medical, Inc. (1986) 180 Cal.App.3d 678, 225 Cal.Rptr. 752; Breazeal v. Henry Mayo Newhall Memorial Hospital (1991) 234 Cal.App.3d 1329, 1337, 286 Cal.Rptr. 207.)

In the context of the instant case, this nonsuit can be upheld on appeal only if the facts asserted in Abeyta's opening statement even when construed most favorably to his position clearly establish this oral employment contract could never be "performed" within one year and thus is unenforceable under the statute of frauds.

We begin with the meaning of the relevant provision of the statute of frauds, section 1624(a), as it applies to oral employment agreements. ¹ For guidance on this question we need look no further than the decision the Supreme Court highlighted in its order remanding the writ petition to this court, Foley v. Interactive Data, supra.

"Civil Code section 1624, subdivision (a), invalidates '[a]n agreement that by its terms is not to be performed within a year from the making thereof' unless the contract 'or some note or memorandum thereof, [is] in writing and subscribed by the party to be charged or by the party's agent.' In White Lighting Co. v. Wolfson (1968) 68 Cal.2d 336, 66 Cal.Rptr. 697, 438 P.2d 345, we held that this portion of the statute of frauds 'applies only to those contracts which, by their terms, cannot possibly be performed within one year.' (Id., at p. 343, 66 Cal.Rptr. 697, 438 P.2d 345.)...." (Foley v. Interactive Data, supra, 47 Cal.3d 654, 671, 254 Cal.Rptr. 211, 765 P.2d 373.)

In Foley itself the Court of Appeal had affirmed a demurrer on grounds inclusion of a term in an oral contract allowing termination only for cause created "a reasonable expectation of employment for more than one year (in which case the statute of frauds does apply, barring this action).' " (47 Cal.3d at p. 672, 254 Cal.Rptr. 211, 765 P.2d 373.) In rejecting this grounds for upholding the demurrer, our high court ruled: "Even if the original oral agreement had expressly promised plaintiff 'permanent' employment terminable only on the condition of his subsequent poor performance or other good cause, such an agreement, if for no specified term, could possibly be completed within one year. (Citation.) Because the employee can quit or the employer can discharge for cause, even an agreement that strictly defines appropriate grounds for discharge can be completely performed within one year--or within one day for that matter." (Id., at pp. 672-673, 254 Cal.Rptr. 211, 765 P.2d 373.) (Emphasis in original.)

Most significantly, given the facts asserted in Abeyta's opening statement, the California Supreme Court summarized the holdings of several California and out-of-state decisions it approved: "These authorities support the general rule that if a condition terminating a contract may occur within one year of its making, then the contract is performable within a year and does not fall within the scope of the statue of frauds. This is true even though performance of the contract may extend for longer than one year if the condition does not occur." (Citation.)

"Other courts have pointed out that within a year an employee such as plaintiff could have (1) been discharged for cause (citation); (2) retired, died or voluntarily left employment (citation); or (3) been terminated if declining profitability compelled a general layoff or cessation of business altogether." (Citation.) (Id., at p. 673, 254 Cal.Rptr. 211, 765 P.2d 373, italics added.)

The California Supreme Court underscored the breadth and scope of its holding in Foley by quoting from a 90-year-old Massachusetts case. "In 1897, the Supreme Judicial Court of Massachusetts rejected an employer's contention that the statute of frauds invalidated an oral agreement for 'permanent employment' so long as the plaintiff, an enameler, performed his work satisfactorily. The majority, including Chief Justice Field and Justice Holmes, rejected the employer's defense. 'It has been repeatedly held that, if an agreement whose performance would otherwise extend beyond a year may be completely performed within a year on the happening of some contingency, it is not within the statute of...