Collins v. Allied Pharmacy Management, Inc.

Decision Date03 March 1994
Docket NumberNo. C14-92-01167-CV,C14-92-01167-CV
Citation871 S.W.2d 929
PartiesJeanne COLLINS and Craig Torry, Appellants, v. ALLIED PHARMACY MANAGEMENT, INC., APM Materials Management, Inc., and R. Dirk Allison, Appellees. (14th Dist.)
CourtTexas Court of Appeals

James C. Plummer, Houston, for appellants.

Nicholas E. Zito, Rondall D. Wilkins, Houston, for appellees.

Before ROBERTSON, CANNON and DRAUGHN, JJ.

OPINION

ROBERTSON, Justice.

This appeal is from a summary judgment in favor of appellees, Allied Pharmacy Management, Inc. ("Allied"), APM Materials Management, Inc. ("APM"), and R. Dirk Allison ("Allison"). Appellants, Jeanne Collins ("Collins") and Craig Torry ("Torry"), sued appellees for damages arising out of the alleged wrongful termination or repudiation of their employment contracts. Appellants raise eleven points of error. We affirm.

FACTUAL BACKGROUND

In 1989, Collins began discussions with Allison, Allied's president, about a business venture involving materials management of hospital equipment and supplies. They planned to form a new company, APM, a subsidiary of Allied. Collins told Allison she would provide a team including herself, Torry and Mike Louviere, head of the materials management department at a hospital in Baton Rouge, Louisiana. At the time of these discussions, both Collins and Torry were employed with Owens Healthcare ("Owens").

Allison offered Collins a job as vice-president of APM in a letter dated August 23, 1989, and Collins claims she accepted the offer on August 24. The letter outlined in part the benefits of the position including a "[b]ase salary of $70,000" and stock options "with options to vest over three years." Allison then followed up with another letter outlining additional terms. In a letter dated September 15, 1989, Collins, acting as vice-president of APM, offered Torry a job. Both Collins and Torry claim they submitted their written resignations to Owens on September 12, 1989 in reliance on Allied's offers.

On September 19, 1989, Collins, Allison, and a third director signed a "Unanimous Consent of Directors in Lieu of Organizational Meeting of the Board of Directors" for APM. This document authorized issuance of stock options to Collins and Torry. One of the new corporation's resolutions reflected the acceptance of offers by Collins and Torry to purchase 10 shares of stock each for a nominal consideration of $.10.

On September 27, 1989, Collins told Allison that Louviere would not be joining the team and their potential contracts would be reduced from six to four in the first year, possibly affecting APM's projected financial figures. According to Collins, Allied suggested moving the business to Dallas to save money, but she and Torry refused.

The record does not reflect that Collins and Torry were fired, but they did not commence work for APM. They sued appellees, alleging that their employment agreements were wrongfully repudiated and terminated. Their suit alleged: breach of contract; promissory estoppel; fraud; negligent misrepresentation; breach of a duty of good faith; and intentional and negligent infliction of emotional distress. 1

STANDARD OF REVIEW

The rules to be followed in reviewing a summary judgment are well established:

1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

2. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true.

3. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.

Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985).

A defendant moving for summary judgment has the burden of showing as a matter of law that no material issue of fact exists for the plaintiff's causes of action. Griffin v. Rowden, 654 S.W.2d 435, 435-36 (Tex.1983). Summary judgment for the defendant may be granted if a plaintiff pleads facts which affirmatively negate his cause of action. Texas Dept. of Corrections v. Herring, 513 S.W.2d 6, 9 (Tex.1974). Summary judgment for the defendant disposing of the entire case is proper only if, as a matter of law, the plaintiff could not succeed upon any theories pled. Delgado v. Burns, 656 S.W.2d 428, 429 (Tex.1983). When the trial court's order granting summary judgment does not specify the grounds upon which it was granted, as here, appellants must show that each of the independent arguments alleged in the motion is insufficient to support the order. Tilotta v. Goodall, 752 S.W.2d 160, 161 (Tex.App.--Houston [1st Dist.] 1988, writ denied).

BREACH OF CONTRACT

Appellants complain in points of error four through ten that the trial court erred in granting summary judgment on their breach of contract claims. As appellants recognize, Texas follows the traditional rule that employment contracts may be terminated by either party at will and without cause, absent an express agreement limiting the right of termination. 2 Schroeder v. Texas Iron Works, Inc., 813 S.W.2d 483, 489 (Tex.1991); Molder v. Southwestern Bell Telephone Co, 665 S.W.2d 175, 177 (Tex.App.--Houston [1st Dist.] 1983, writ ref'd n.r.e.). Thus, there are two essential elements to a breach of employment contract cause of action: (1) the existence of a contract specifically and directly limiting the employer's right to terminate the employment contract at will; and (2) the employment contract must be in writing. Stiver v Texas Instruments, Inc., 750 S.W.2d 843, 846 (Tex.App.--Houston [14th Dist.] 1988, no writ).

Appellees pled the statute of frauds as an affirmative defense, and their summary judgment proof negated appellants' contract action as a matter of law. We hold that the statute of frauds bars enforcement of appellants' employment contracts and prohibits oral modification of these contracts. Our reasoning is detailed in the following discussion of appellants' points of error concerning applicability of the statute of frauds, oral modification of the contract, and breach of the duty of good faith and fair dealing.

Statute of Frauds

The requirements for an enforceable contract as set forth in section 26.01(b)(6) of the Texas Business & Commerce Code are as follows:

A promise or agreement [which is not to be performed within one year from the date of making the agreement] is not enforceable unless the promise or agreement, or a memorandum of it, is

(1) in writing, and

(2) signed by the person to be charged with the promise or agreement or by someone lawfully authorized to sign for him.

TEX.BUS. & COM.CODE ANN. § 26.01(a), (b)(6) (Vernon 1987). An employment agreement for a period longer than one year is within the statute of frauds. Schroeder, 813 S.W.2d at 489.

Originally, appellants pled that their agreements were for three year terms. They alleged that "the duration of these agreements, implicitly, is for a term of three years." 3 In addition, in Collins' affidavit in support of appellants' response to the motion for summary judgment, she asserted, "Allison represented that the stock option agreements with the three (3) year vesting would sufficiently evidence the term of our employment."

In point ten, appellants allege that their employment agreements were evidenced by writings sufficient to satisfy the statute of frauds. In order to satisfy the statute of frauds, there must be "a written memorandum which is complete within itself in every detail and which contains all of the essential elements of the agreement, so that the contract can be ascertained from the writing without resort to oral testimony." Cohen v. McCutchin, 565 S.W.2d 230, 232 (Tex.1978).

Appellants rely on the two letters sent by Allison to Collins, the letter from Collins to Torry, the "Unanimous Consent" of the Board of Directors for APM, and the stock option agreements. The letters do not set forth the alleged intended duration of three years, which is an essential term. The "Unanimous Consent" does not expressly set forth a fixed term of employment. The stock option agreements attached to the "Unanimous Consent" expressly state that the options do not confer any right to continued employment. In addition, Collins testified by deposition that there was no written document setting forth a term or length of employment for either herself or Torry. Appellants conceded that the term of employment was missing from the documents, but argued that it could be implied from reading all the documentation as a whole. We reject this contention. A written memorandum of an oral employment agreement for three years that does not specify the term, even though it may imply a three year term was contemplated, has been held insufficient to satisfy the statute of frauds. Jackman v. Anheuser-Busch, Inc., 162 S.W.2d 744, 746 (Tex.Civ.App --Dallas 1942, writ ref'd). We likewise hold that these writings are insufficient to satisfy the statute of frauds and overrule point ten.

Consequently, in point nine, appellants argue that the employment agreements are not within the statute of frauds because they could be performed within one year. Appellants argue that they could be terminated for cause, making the agreement performable within a year. When a contract is for a term longer than one year, the mere possibility of termination within a year because of death or another contingent event does not then insulate it from the statute of frauds. Gilliam v. Kouchoucos, 161 Tex. 299, 340 S.W.2d 27, 30 (Tex.1960); M.R.S. Datascope v. Exchange Data Corp., 745 S.W.2d 542, 544 (Tex.App.--Houston [1st Dist.] 1988, no writ). Moreover, for a contract to fall outside the statute of frauds, performance must be possible within one year; termination for cause is not equivalent to performance of the contract. We conclude the possibility of termination for cause does not take a contract outside the statute of frauds, and we overrule...

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