Anderson v. Kammeier

• Decision Date: 18 November 1977
• Docket Number: No. 47205,47205
• Parties: Dennis D. ANDERSON, et al., Respondents, v. Gayton R. KAMMEIER, Appellant, and G. R. K., INC., and Employment Counselors, Inc., Appellants, v. Dennis D. ANDERSON, et al., Respondents.
• Court: Minnesota Supreme Court

Page 366

262 N.W.2d 366

Dennis D. ANDERSON, et al., Respondents, v. Gayton R. KAMMEIER, Appellant, and G. R. K., INC., and Employment Counselors, Inc., Appellants, v. Dennis D. ANDERSON, et al., Respondents.

No. 47205.

Supreme Court of Minnesota.

Nov. 18, 1977.

Rehearing Denied Jan. 9, 1978.

Syllabus by the Court

1. Under the facts of this case, the trial court could find that the actions of the appellant allowed the respondent to rescind a management consultant contract on the grounds of material breach.

2. (a) Under the facts of this case, the trial court could find that a statement that a businessman was a "draft dodger" constituted sufficient accusation of a crime to warrant a finding of slander per se.

(b) Statements that a businessman "should not be trusted" in the operation of his business affairs and that he would "stab anyone in the back" are slanderous per se.

Monte M. Miller, Minneapolis, Craig D. Larson, Champlin, for appellants.

Simonson & Bartsh and Thomas C. Bartsh, Minneapolis, for respondents.

Heard before KELLY, YETKA, and SCOTT, JJ., and considered and decided by the court en banc.

YETKA, Justice.

An appeal following a bench trial in Hennepin County District Court in which the respondents were allowed to rescind a management consultant contract and awarded $1,000 in punitive damages for slander. We affirm.

This appeal raises these issues:

(1) Whether the actions of the appellant constituted a material breach of the agreement between the parties.

(2) Whether the agreement entered into between the parties was divisible or entire.

(3) Whether the statements that a businessman was a "draft dodger," that he "should not be trusted," and that he would "stab anyone in the back" are slander per se.

This case involves the sale of an employment business to several employees. Appellant Gayton R. Kammeier owned Employment Counselors, Inc. (ECI) and managed its Bloomington office. Respondent Dennis D. Anderson worked for ECI and managed its Minneapolis office. In October of 1969, Anderson told Kammeier he wanted to leave ECI and start his own agency. During the negotiations Kammeier met with two other employees of the Minneapolis office (Richard Thompson and Richard Rost) who were considering leaving ECI and joining Anderson. During the course of their conversation, Kammeier referred to Anderson and asked if they could "put their faith in a draft dodger." Subsequently, both employees joined Anderson.

On October 28, 1969, Kammeier executed an agreement ¹ with Anderson and Thompson. For a consideration of $40,000 Kammeier agreed to transfer the Minneapolis office to Anderson and Thompson. Kammeier agreed to transfer the remainder of the lease on the Minneapolis office, the office furniture and equipment, and all the standing job orders and completed applicant forms. In addition, he agreed to release the parties from their employment contracts (which contained restrictive covenants), and to advise the parties in the running of the business. After the execution of the agreement, the parties decided to allocate the majority of the $40,000 to the management consultation agreement to receive more favorable tax treatment. Accordingly, the parties executed a second agreement on December 1, 1969, in three parts, a bill of sale for the lease and equipment ($5,000), a release of the employment contracts ($5,002), and a management consulting agreement ($32,500). The consideration for the consulting agreement was to be paid in monthly installments of $1,250 starting on March 15, 1970; in return, Kammeier agreed to furnish the following services upon specific request:

"a. Provide advice and consultation regarding hiring and training employees, preparation and placement of advertising, obtaining job orders, purchasing, supervising employees, accounting, bookkeeping, and other services for the proper operating practices of Graduate.

"b. Provide advice and consultation with collection procedures and problems (excluding legal services)."

Anderson and Thompson would do business as Graduate Personnel, Inc. Kammeier also sold his interest in a second employment agency in which Anderson had been involved, D.S.I., for $400, one tape recorder, and 40 percent of the profits. A tape disclosing illegal recruiting activities by a D.S.I. employee was inadvertently included.

During the next 3 months, Kammeier was called upon to give advice on three occasions, twice for legal matters, the necessity of licensure for the affiliated D.S.I. and the application of the minimum wage law to employment counselors, and once with respect to the bonding necessary to operate the employment agency. Twice the advice was erroneous.

On March 16, 1970, one day after the first installment was due on the consultation agreement, Kammeier received a letter from Anderson and Thompson purporting to terminate the consultation agreement with G.R.K. The letter alleged that employees of Kammeier's had been "circulating certain false and slanderous information about Graduate Personnel, Inc. and its employees," and had "intentionally engaged in conduct designed to impair the potential or existing business relationships of Graduate Personnel, Inc." In response, Kammeier reiterated his willingness to perform the contract. No payments were ever made.

Shortly thereafter, the Minnesota Department of Labor and Industry, responding to a complaint from 3M, contacted Kammeier about an investigation of the affiliated firm (D.S.I.) he had sold to Anderson. Without informing Graduate, Kammeier disclosed the contents of the tape to the state. At the time, Graduate was attempting to sell D.S.I. to an employee. Kammeier advised the employee to be cautious in purchasing D.S.I. from Anderson because he would "stab anyone in the back if given the chance," and further that Anderson still owed him money from the sale of the Minneapolis office. The state refused D.S.I.'s application for a license.

In November of 1970, Kammeier advised personnel representatives of Fingerhut Corporation that Anderson and Thompson were "a couple of highbinders," and that the reputation of Anderson's wife "left much to be desired." Fingerhut continued to do business with Anderson and Thompson.

Thereafter, the present action was instituted. Kammeier sought the payment of the $32,500 remaining on the purchase price. Anderson and Thompson claimed a failure of consideration and rescission, and requested damages for slander.

The trial court held that Graduate was justified in its March 16, 1970 rescission of the contract. With respect to the claim for slander, the court found that statements were slanderous per se and awarded $1,000 in punitive damages, even though Graduate did not lose any clients or suffer any monetary damage.

Contract Claim

On appeal, the appellants contend the trial court erred in allowing the rescission of the management consultation agreement on two grounds, first, that the breach, if any, was not material, second, that the consultation agreement was not severable from the other agreements.

With respect to the alleged breach, the trial court held that the advice which Kammeier gave, the alleged slanderous remarks by Kammeier, and the turning over of the tape to the state of Minnesota constituted grounds for rescission because

" * * * after the bad advice that had been given, the slanderous remarks by Kammeier, and the method used to get the contents of the DSI tape to the State, Graduate could not go with feelings of reasonable safety to confide its problems to G.R.K. and expect to rely upon its advices. The Management Consultant Agreement was gone at that point as a practical matter and Anderson, Thompson and Graduate were justified in declaring it rescinded."

Given the personal nature of the services expected and the degree of confidence necessary to assure the proper completion of them, the trial court was correct in concluding that the actions of Kammeier constituted a material breach of the agreement.

Because the breach was a material one, the issue then becomes whether merely the management consultation agreement or the entire transaction should have been rescinded, that is, whether the management contract was severable from the lease of office space and release of the employment contracts. The appellants argue the three agreements constituted a single transaction and thus the rescission must be of all three agreements. The respondents, on the other hand, contend the three agreements are divisible.

Whether a contract is entire or divisible depends on the intent of the parties; it must be determined by considering the language used, the subject matter of the contract, and how the parties themselves treated it. ² E. g., McGrath v. Cannon 55 Minn. 457, 57 N.W. 150 (1893). See, generally, 3A Corbin, Contracts, §§ 687 to 699; 6 Williston, Contracts, §§ 860 to 870; 17 Am.Jur.2d, Contracts, §§ 324 to 328; 4 Dunnell, Dig. (3 ed.) § 1727, Williston defines a divisible contract in these terms:

"A contract under which the whole performance is divided into two sets of partial performances, each part of each set being the agreed exchange for a corresponding part of the set of performances to be rendered by the other promisor, is called a divisible contract. Or, as expressed in the cases:

'A contract is divisible where by its terms, 1, performance of each party is divided into two or more parts, and, 2, the number of parts due from each party is the same, and, 3, the performance of each part by one party is the agreed exchange for a corresponding part by the other party.'

"Or, stated in another way: 'The distinguishing mark of a divisible contract is that it admits of apportionment of the consideration on either side so as to correspond to the unascertained consideration on the other side. Where such a purpose appears in the contract, or is clearly deducible therefrom, it is allowed great significance in ascertaining the intention of the parties. * * * ' " 6...