Corl v. Huron Castings, Inc.

• Decision Date: 01 March 1996
• Docket Number: No. 1,Docket No. 98054,1
• Citation: 544 N.W.2d 278,450 Mich. 620
• Parties: , 64 USLW 2587, 131 Lab.Cas. P 58,116, 11 IER Cases 758 William Lloyd CORL, Plaintiff-Appellee, v. HURON CASTINGS, INC., a Michigan corporation, Defendant-Appellant. Calendar
• Court: Michigan Supreme Court

Page 278

544 N.W.2d 278

450 Mich. 620, 64 USLW 2587, 131

Lab.Cas. P 58,116,

11 IER Cases 758

William Lloyd CORL, Plaintiff-Appellee, v. HURON CASTINGS, INC., a Michigan corporation, Defendant-Appellant.

Docket No. 98054.

Calendar No. 1.

Supreme Court of Michigan.

Argued Oct. 10, 1995.

Decided March 1, 1996.

Berkley, Mengel & Vining, P.C. by Christopher E. Mengel and Guy C. Vining, Detroit, for plaintiff.

Braun, Kendrick, Finkbeiner by John A. Decker and Scott C. Strattard, Saginaw, for defendant.

OPINION

RILEY, Justice.

In this action for breach of employment contract, plaintiff employee was wrongfully discharged in violation of Toussaint v. Blue Cross & Blue Shield of Michigan, 408 Mich. 579, 292 N.W.2d 880 (1980). We are asked to decide whether plaintiff's unemployment compensation benefits should be deducted from his breach of contract damage award. In accordance with accepted principles of contract law, we hold that plaintiff's unemployment compensation benefits must be deducted from his subsequent damage award. Moreover, we conclude that this result best effectuates the intent of the Legislature by preventing the duplication of an employee's wage loss replacement. The judgment of the Court of Appeals is reversed, and the case is remanded to the trial court for entry of an award consistent with this opinion.

I

Plaintiff William Corl was employed by defendant Huron Castings in July 1981. He remained an employee until he was terminated in May 1988. After his termination, he filed a wrongful discharge claim pursuant to Toussaint, supra. ¹ Before trial, the parties stipulated that plaintiff's damages were $16,500. This figure reflected a $6,200 deduction for unemployment compensation benefits plaintiff had already received. The parties also agreed that, in the event the jury returned a verdict in favor of plaintiff, the trial judge would determine whether the award could be enhanced by $6,200. ²

The case was tried before Judge Knoblock in the Huron Circuit Court. The jury returned a verdict for plaintiff, and, as stipulated, a judgment for $16,500 was entered. Plaintiff then petitioned the court to enhance the award by $6,200. Plaintiff argued that the unemployment compensation benefits were a collateral source and should be added to the contract damage award. On the basis of Pennington v. Whiting Tubular Products, Inc., 370 Mich. 590, 122 N.W.2d 692 (1963), the trial judge agreed and added the unemployment compensation benefits to the judgment. The judge conceded that the result was illogical, but felt obligated to follow Pennington.

Defendant appealed, and the Court of Appeals affirmed ³ in an unpublished memorandum opinion, explaining that although defendant's argument had some merit, it was likewise constrained to follow Pennington. ⁴ Defendant filed an application for leave to appeal. We granted leave ⁵ and now reverse the opinion of the Court of Appeals.

II

We are required to assess plaintiff's damages in this wrongful discharge action. Plaintiff pleaded and proved his case on the basis of Toussaint. In Toussaint, supra at 610, 292 N.W.2d 880, this Court stated: "We hold only that an employer's express agreement to terminate only for cause, or statements of company policy and procedure to that effect, can give rise to rights enforceable in contract." (Emphasis added.) ⁶ The remedy for breach of contract is to place the nonbreaching party in as good a position as if the contract had been fully performed. ⁷ Accordingly, the goal in contract law is not to punish the breaching party, but to make the nonbreaching party whole. ⁸

A

Cognizant of these principles, we evaluate plaintiff's assertion that the collateral source rule allows full recovery from defendant notwithstanding the unemployment compensation benefits he received. The collateral source rule is a concept of tort law which provides "that the recovery of damages from a tortfeasor is not reduced by the plaintiff's receipt of money in compensation for his injuries from other sources." Tebo v. Havlik, 418 Mich. 350, 366, 343 N.W.2d 181 (1984) (emphasis added). ⁹

In a unanimous decision by this Court in Ferrett v. General Motors Corp., 438 Mich. 235, 475 N.W.2d 243 (1991), we reaffirmed Toussaint, supra, holding that the plaintiff's cause of action was not in tort. ¹⁰ In Ferrett, supra at 239, 475 N.W.2d 243, the defendant brought an action for breach of contract and negligent evaluation after he was terminated for "excessive absenteeism." We declined "to recognize an action in tort for negligent evaluation," stating that an action could "be maintained, if at all, only for breach of a contractual obligation to evaluate." Id. at 242, 475 N.W.2d 243. Of importance to the present case, we then announced the underlying theory for refusal to recognize a claim in tort:

"We have simply the violation of a promise to perform the agreement. The only duty, other than that voluntarily assumed in the contract to which the defendant was subject, was his duty to perform his promise in a careful and skillful manner without risk of harm to others, the violation of which is not alleged. What we are left with is defendant's failure to complete his contracted-for performance. This is not a duty imposed by the law upon all, the violation of which gives rise to a tort action, but a duty arising out of the intentions of the parties themselves and owed only to those specific individuals to whom the promise runs. A tort action will not lie. [Emphasis added.]." [Id. at 243, 475 N.W.2d 243, citing Hart v. Ludwig, 347 Mich. 559, 565-566, 79 N.W.2d 895 (1956).]

Similarly, in the present case, we are confronted with an employer who impliedly contracted to terminate his employee for just cause. ¹¹ The jury held that defendant failed to fulfill his duty. This duty, however, was not imposed upon "all," but only upon plaintiff, who impliedly contracted with defendant. Therefore, we conclude that defendant's liability does not arise in tort. ¹²

In order for plaintiff to prevail, we must extend the collateral source rule to principles of contract law. ¹³ Significantly, however, plaintiff does not cite (nor have we been able to find) a single case involving breach of contract implementing the collateral source rule. Further, plaintiff's request is in direct conflict with the fundamental precept that the remedy for breach of contract focuses on making the nonbreaching party whole. ¹⁴ Consequently, cases relied on by plaintiff, such as Motts v. Michigan Cab Co., 274 Mich. 437, 264 N.W. 855 (1936), ¹⁵ involving tort liability, have no application whatsoever to this case. ¹⁶ Thus, in the face of this Court's reluctance to extend tort remedies to cases pleaded and proven in contract, we elect to continue to distinguish between tort and contract remedies. ¹⁷

B

The present case is also distinguishable from the federal cases on which plaintiff relies. In Nat'l Labor Relations Bd. v. Gullett Gin Co., 340 U.S. 361, 71 S.Ct. 337, 95 L.Ed. 337 (1951), the United States Supreme Court refused to deduct unemployment compensation benefits from a breach of employment contract damage award. Gullett involved employees who were discharged in violation of the Labor Management Relations Act. Cognizant of its limited power to review, the Court upheld the National Labor Relations Board's refusal to deduct unemployment compensation benefits from the award. ¹⁸

The NLRA requires that upon a finding of unfair labor practice, the NLRB must " 'take such affirmative action including reinstatement of employees with or without back pay, as will effectuate the policies of this Act....' " Gullett, supra at 362, 71 S.Ct. at 339. In Gullett, supra at 364, 71 S.Ct. at 339, the Court explained that allowing the employee to collect unemployment compensation from the State of Louisiana "may reasonably be considered to effectuate the policies of the Act." Gullett is distinguishable because it involved employees who were discriminatorily discharged. Thus, the Court merely held that it was within the NLRB's discretion to allow the discharged employees to collect unemployment compensation because it would effectuate the policies of that specific act.

The goals of and the policies surrounding the NLRA distinguish Gullett from the present case. In fact, upon finding an unfair labor practice, the board was obligated to "issue a cease and desist order requiring the guilty party 'to take such affirmative action including reinstatement of employees with or without back pay, as will effectuate the policies of [the] Act....' " Id. at 362, 71 S.Ct. at 339 (emphasis added). However, here we address a case of wrongful discharge that gives rise to an action for breach of contract only. As such, we are unable to attribute "guilt" to one of the parties in the same manner as in Gullett. ¹⁹

We are persuaded that Gullett is more accurately analyzed in conjunction with United Protective Workers of America v. Ford Motor Co., 223 F.2d 49 (C.A.7, 1955). In Ford, the United States Court of Appeals for the Seventh Circuit held that Ford Motor Company improperly required an employee to retire. The trial judge reduced the employee's damages by the amount of social security and annuity payments he received between the period in which he was wrongfully retired and the date on which he was required to retire. The court distinguished Gullett, stating that it did not require a deduction of unemployment compensation benefits:

The cases speak only of the National Labor Relations Board's power to award back pay under the Act without deductions of any amounts other than for wages or earnings received during the period. They are not decisive as to the propriety of deductions which should be made in determining the amount of damages in a common law action for damages for the breach of an employment contract. [ Ford, supra at 53.]

The court correctly narrowed the focus of its decision to the proper amount of damages for breach of contract....