Cron v. Hargro Fabrics, Inc.

• Decision Date: 26 March 1998
• Citation: 694 N.E.2d 56,670 N.Y.S.2d 973,91 N.Y.2d 362
• Parties: , 694 N.E.2d 56, 13 IER Cases 1782, 1998 N.Y. Slip Op. 2857 Herbert CRON, Appellant, v. HARGRO FABRICS, INC., Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 973

670 N.Y.S.2d 973

91 N.Y.2d 362, 694 N.E.2d 56, 13 IER

Cases 1782,

1998 N.Y. Slip Op. 2857

Herbert CRON, Appellant, v. HARGRO FABRICS, INC., Respondent.

Court of Appeals of New York.

March 26, 1998.

Jaffe, Segal & Ross, New York City (Bill S. Light, of counsel), for appellant.

Parker Duryee Rosoff & Haft, New York City (Robert J. Miller and Steven C. Brown, of counsel), for respondent.

OPINION OF THE COURT

SMITH, Judge.

The primary issue presented is whether an alleged oral agreement to pay a bonus consisting of a percentage of a company's annual pretax profits is within the Statute of Frauds and unenforceable unless in writing. We conclude that the possibility that the employee's compensation must be calculated after the passage of a year does not, standing alone, bring the agreement within the one-year proscription of the Statute of Frauds. The order of the Appellate Division should be reversed.

As alleged in his complaint, plaintiff was employed by defendant corporation, a converter of textile fabrics, for approximately 13 years before he was discharged in January 1996. During each of the calendar years 1990 through 1995, defendant allegedly agreed to compensate plaintiff for his employment services with an annual salary equal to the salary of the defendant's president. Plaintiff also alleged that defendant agreed to pay plaintiff a bonus equal to 20% of defendant's annual pretax profits. When plaintiff discovered that his compensation during this period was not in accordance with the parties' alleged oral understanding, he commenced the present action. Specifically, plaintiff claimed that defendant had failed to pay him the proper share of defendant's annual pretax profits as agreed. Plaintiff further claimed that defendant's president had received a salary "far in excess" of his own.

Defendant moved to dismiss plaintiff's complaint pursuant to CPLR 3211(a)(5) based upon the Statute of Frauds (see, General Obligations Law § 5-701[a][1] ). In support of the motion, defendant claimed that the salary of its president "included a percentage of the annual net sales" of defendant. According to defendant, neither the annual net profits nor the annual net sales could be determined "according to usual accounting methods" until "sixty days into the next calendar year." Since plaintiff's claims for compensation could not be calculated within a period of one year, defendant argued that the Statute of Frauds rendered the alleged oral agreement unenforceable.

Defendant also argued that it never agreed to pay plaintiff a salary equal to that of the defendant's president. Furthermore, defendant claimed that it never guaranteed plaintiff a bonus. Although bonuses had been paid in the past, defendant argued that such payments and the amounts thereof were determined in the "sole discretion" of defendant's president and based upon plaintiff's performance and the company's past and potential performance.

Plaintiff failed to submit any documentary proof of the alleged compensation agreement in response to defendant's motion. Plaintiff explained that an agreement regarding his compensation was reached through annual discussions with defendant's president. In these discussions, the parties would reach an agreement as to the company's anticipated profits for the year. Plaintiff would then receive "equal monthly payments on account towards this bonus" based upon the estimation of profits. Plaintiff also affirmed that his employment was terminable at will and that:

"[i]n the event that my employment ceased * * * during any given year, I would have been entitled only to receive my annual base salary and bonus percentage computed to the last day of my employment. My share of the pre-tax profits for any given year would have been payable only with regard to the business that the company had transacted up to the point of my termination."

In its reply papers on its dismissal motion, defendant argued that it would be unable to pay plaintiff a bonus "computed to the last day" of plaintiff's employment if such employment were terminated prior to the end of the year as plaintiff claimed. Defendant argued that its business was "highly seasonal," with significant variations in profitability at different times of the year. Thus, any bonus based upon a percentage of the profits "could Supreme Court denied the dismissal motion. In so ruling, the court reasoned that "the fact that an employee's earnings were to some extent based on the employer's annual sales merely provides a method of computation and does not bear on the duration of the contract."

not be determined in a meaningful and fair way until the company's profits as a whole are calculated after the end of the calendar year."

The Appellate Division reversed, granted the motion and dismissed the complaint. The Court recognized that the "amount owing was not ascertainable much less payable before the passage of the applicable calendar year." (238 A.D.2d 181, 182, 655 N.Y.S.2d 531.) The Court concluded that "[w]hile the employment relationship was undoubtedly terminable at any time, the contract quite evidently imposed upon the employer obligations which persisted in excess of a year, even if plaintiff's employment should end sooner" (id., at 183, 655 N.Y.S.2d 531).

This Court granted leave to appeal and we now reinstate Supreme Court's order denying dismissal of the complaint.

DISCUSSION

On a CPLR 3211 motion made against a complaint, a court must take the allegations as true and resolve all inferences which reasonably flow therefrom in favor of the pleader (see, Sanders v. Winship, 57 N.Y.2d 391, 394, 456 N.Y.S.2d 720, 442 N.E.2d 1231). In opposition to such a motion, a plaintiff may submit affidavits "to remedy defects in the complaint" and "preserve inartfully pleaded, but potentially meritorious claims" (Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 635, 636, 389 N.Y.S.2d 314, 357 N.E.2d 970; but see, American Indus. Contr. Co. v. Travelers Indem. Co., 42 N.Y.2d 1041, 1043, 399 N.Y.S.2d 206, 369 N.E.2d 762). Though limited to that purpose, such additional submissions of the plaintiff, if any, will similarly be "given their most favorable intendment" (Arrington v. New York Times Co., 55 N.Y.2d 433, 442, 449 N.Y.S.2d 941, 434 N.E.2d 1319). ^*

New York law provides that an agreement will not be recognized or enforceable if it is not in writing and "subscribed by the party to be charged therewith" when the agreement "[b]y its terms is not to be performed within one year from the making thereof" (General Obligations Law § 5-701[a][1] ). We have long interpreted this provision of the Statute of Frauds to encompass only those contracts which, by their terms, "have absolutely no possibility in fact and law of full performance within one year" (D & N Boening v. Kirsch Beverages, 63 N.Y.2d 449, 454, 483 N.Y.S.2d 164, 472 N.E.2d 992). As long as the agreement may be "fairly and reasonably interpreted" such that it may be performed within a year, the Statute of Frauds will not act as a bar however unexpected, unlikely, or even improbable that such performance will occur during that time frame (Warren Chem. & Mfg. Co. v. Holbrook, 118 N.Y. 586, 593, 23 N.E. 908; see also, Kent v. Kent, 62 N.Y. 560, 564; Nat Nal Serv. Stations v. Wolf, 304 N.Y. 332, 335, 107 N.E.2d 473; North Shore Bottling Co. v. Schmidt & Sons, 22 N.Y.2d 171, 175, 292 N.Y.S.2d 86, 239 N.E.2d 189; Polykoff Adv. v. Houbigant, Inc., 43 N.Y.2d 921, 922, 403 N.Y.S.2d 732, 374 N.E.2d 625 [contract "which by its terms (could) be performed within a year * * * would be without the statute even if, as a practical matter, it were well nigh impossible of performance within a year"]; D & N Boening v. Kirsch Beverages, supra, 63 N.Y.2d, at 455, 483 N.Y.S.2d 164, 472 N.E.2d 992 [statute will not bar agreement where "there might be any possible means of performance within one year * * * in whatever manner and however impractical"] ).

It is undisputed that the alleged employment was terminable at will. An at-will employment relationship may be "freely terminated by either party at any time for any reason or even for no reason" with limited exceptions not relevant here (Murphy v American Home Prods. Corp., 58 N.Y.2d 293, 300, 461 N.Y.S.2d 232, 448 N.E.2d 86; see also, Martin v. New York Life Ins. Co., 148 N.Y. 117, 121, 42 N.E. 416; Wieder v. Skala, 80 N.Y.2d 628, 593 N.Y.S.2d 752, 609 N.E.2d 105; Sabetay v. Sterling Drug, 69 N.Y.2d 329, 514 N.Y.S.2d 209, 506 N.E.2d 919). Under these principles, an at-will employment relationship may usually be completed within a year and ordinarily would not require performance to extend beyond that time. Indeed, we have typically held that employment agreements of this type are without the proscription of the Statute of Frauds concerning one-year performance (see, e.g., Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458, 463, 457 N.Y.S.2d 193, 443 N.E.2d 441 ["the agreement * * * whether terminable at will or only for just cause, is not one which, 'by its terms', could not be performed within one year and, therefore, is not one which is barred"] [citation omitted]; Nat Nal Serv. Stations v. Wolf, 304 N.Y. 332, 107 N.E.2d 473, supra; Murphy v. American Home Prods. Corp., supra, 58 N.Y.2d, at 305, n. 2, 461 N.Y.S.2d 232, 448 N.E.2d 86).

Despite being terminable at will, defendant argues that the employment relationship at issue falls within the Statute of Frauds because the calculation of plaintiff's bonus would necessarily occur after the passage of a year. However, we are satisfied in this particular pleading context that that singular facet of the alleged agreement does not bring it within the bar of the Statute of Frauds.

It has been stated that "[c]ourts have specifically and consistently held that the presence of bonus or salary terms payable after one year does not bring a long-term indefinite employment contract within the [Statute of Frauds]" (Hodge v. Evans Fin. Corp., 823 F.2d...