Dallenbach v. MAPCO Gas Products, Inc.

• Decision Date: 18 July 1990
• Docket Number: No. 88-1734,88-1734
• Citation: 459 N.W.2d 483
• Parties: 29 Wage & Hour Cas. (BNA) 1451, 119 Lab.Cas. P 56,678, 5 IER Cases 1489 Wayne DALLENBACH, Appellee, v. MAPCO GAS PRODUCTS, INC., Appellant.
• Court: Iowa Supreme Court

Page 483

459 N.W.2d 483

29 Wage & Hour Cas. (BNA) 1451, 119 Lab.Cas. P 56,678,

5 IER Cases 1489

Wayne DALLENBACH, Appellee, v. MAPCO GAS PRODUCTS, INC., Appellant.

No. 88-1734.

Supreme Court of Iowa.

July 18, 1990.

Rehearing Denied Sept. 19, 1990.

W. Michael Shinkle and Ted Breckenfelder, Davenport, for appellant.

Tom Hyland of Hyland, Laden & Pearson, P.C., Des Moines, for appellee.

Considered by McGIVERIN, C.J., and HARRIS, SCHULTZ, NEUMAN and SNELL, JJ.

McGIVERIN, Chief Justice.

Plaintiff Wayne Dallenbach worked for defendant MAPCO Gas Products, Inc., (MAPCO Gas) or its predecessors from 1952 until June 1986. In November 1986, Dallenbach brought this law action against MAPCO Gas, alleging that it had breached its employment contract with him by reducing his 1985 bonus. The amended petition also alleged that the bonus reduction was in violation of the Iowa Wage Payment Collection Law, Iowa Code chapter 91A (1985). MAPCO Gas denied any liability to Dallenbach and also denied that chapter 91A applied to the dispute.

The case was tried to the district court without a jury. The court ruled that MAPCO Gas had breached its contract with Dallenbach by refusing to pay him the full amount of his 1985 bonus. Moreover, the court ruled that chapter 91A applied. Dallenbach was awarded the portion of his 1985 bonus that had been wrongfully withheld, as well as court costs, attorney's fees, and liquidated damages as allowed in certain chapter 91A cases. See Iowa Code § 91A.8.

MAPCO Gas appealed. We transferred the case to the court of appeals. That court affirmed the judgment of the district court.

MAPCO Gas applied for further review, which we granted. We affirm in part, reverse in part, and remand the case for entry of a new judgment.

Our review in this law action is for correction of errors at law. Iowa R.App.P. 4. The district court's findings of fact are binding on appeal if supported by substantial evidence. Iowa R.App.P. 14(f)(1).

I. Background facts and proceedings. Wayne Dallenbach went to work for Thermogas of Cedar Rapids as a delivery truck driver in 1952. He was transferred to Thermogas of Des Moines in 1962.

In 1966, the various Thermogas entities became affiliated with MAPCO, Inc. Thermogas of Des Moines was brought under the corporate organization of MAPCO Gas (an affiliate of Mapco, Inc.), but continued to do business as Thermogas of Des Moines. Dallenbach's employment was unaltered.

In 1969, Dallenbach became Des Moines district manager for MAPCO Gas. MAPCO Gas promised Dallenbach that his compensation would include a monthly base salary and certain benefits, plus an annual "bonus" of 10% of his district's "bonus income." "Bonus income" was the district's net operating profit with certain adjustments, most notably a downward adjustment of 6% of the district's "adjusted average annual assets." Under this arrangement, the bonus for a given calendar year was to be calculated after the calendar year and paid the first part of the following year, generally in February following the district managers meeting held each January.

For the years 1969 to 1977, Dallenbach's annual bonus for the Des Moines district was calculated and paid as just outlined.

In July 1978, the bonus formula was changed from allowing a bonus of 10% of the bonus income to allowing a bonus of 7% of the first $100,000 bonus income, 10% of any excess bonus income, and 5% of the district's "associate dealer and industrial account" profits (the 1978 formula). This change was announced in mid-year but was made effective only prospectively. The 1978 bonus was calculated accordingly and paid as previously outlined.

For the years 1979 to 1984, Dallenbach's annual bonus was calculated by the 1978 formula and paid as previously outlined.

In early 1985, MAPCO Gas learned that its district managers were being paid considerably more than comparable employees of its competitors. The MAPCO Gas bonus plan was especially generous. In April 1985, the bonus formula was changed by increasing the "adjusted average annual asset" deduction from 6% to 10% of the district's adjusted average annual assets (the 1985 formula). This change was made effective for 1985 bonuses and, therefore, retroactively affected the bonus attributable to Des Moines district operations during the first three months of 1985. The evidence conflicted concerning whether this change in the bonus formula for 1985 was discussed at the January 1985 district managers meeting. Dallenbach is not complaining about this change.

There was no other change in the bonus formula during 1985. Dallenbach worked for MAPCO Gas throughout 1985, and that year the Des Moines district had bonus income under the 1985 formula of $236,555.35. The parties agree that under the 1985 formula, Dallenbach's 1985 bonus would be $20,655.35.

On January 10, 1986, a memorandum went out from D.H. Rinke to all district managers. Rinke was a vice president of MAPCO Gas. The memorandum stated that beginning with the start of 1986, MAPCO Gas would be implementing a plan designed to reduce the amount of salary and bonuses it paid its district managers and so bring MAPCO Gas in line with its competitors. The memorandum specifically stated that the "changes mentioned [would] not affect the 1985 bonus...."

The annual MAPCO Gas district managers meeting was held on January 21, 1986. Dallenbach was present. As Rinke was explaining the changes in the bonus formula for 1986, he was interrupted by a member of higher management who informed him and the audience that, in fact, the 1985 bonuses also were going to be reduced to bring them more in line with the industry average. This was the first notice to Dallenbach that his 1985 bonus would not be calculated by the 1985 formula. The evidence conflicted concerning whether he and the other district managers immediately protested the unilateral reduction in their 1985 bonuses.

Dallenbach received his 1985 bonus check the last week in February 1986. It reflected a straight 31% reduction of the bonus as calculated by the 1985 formula, a reduction amounting to $6,403.12. Dallenbach deposited the bonus check.

Dallenbach tendered his resignation in March 1986, effective June 30. He filed this action in November.

Throughout this litigation the parties have agreed that Dallenbach was employed by MAPCO Gas at will, and that his salary and bonus were the subject of an oral agreement between them. The content of the agreement as to the annual bonus is disputed.

Dallenbach's evidence tended to show that he and MAPCO Gas agreed that he would be paid an annual bonus for each year, calculated by a formula announced at the district managers meeting held each year in January. The bonus was to be paid in February of the following year. Any changes in the bonus formula were to be made prospectively. According to Dallenbach, his contractual right to an annual bonus depended solely on the profit made by the Des Moines district and the predetermined formula; MAPCO Gas had no discretion to reduce or refuse to pay his bonus after it was earned by him.

MAPCO Gas's evidence tended to show that the payment of Dallenbach's annual bonus was entirely in the discretion of MAPCO Gas and that the formula could be changed by it at any time, prospectively or retroactively. According to MAPCO Gas, it was under no contractual obligation to pay Dallenbach a bonus calculated pursuant to the 1985 formula. Rather, Dallenbach was only entitled to the 1985 bonus he was actually paid in February 1986.

The district court heard all of the evidence concerning the oral agreement between MAPCO Gas and Dallenbach and found that MAPCO Gas was contractually obligated to pay Dallenbach a 1985 bonus calculated pursuant to the 1985 formula. The court also found that the payment of the bonus was not discretionary for MAPCO Gas.

Based on its findings, the court ruled that MAPCO Gas's unilateral 31% reduction in Dallenbach's 1985 bonus was a breach of contract. In addition, the court concluded that MAPCO Gas's actions subjected it to liability not only for the unpaid portion of the bonus, but also for liquidated damages, court costs, and attorney's fees. Judgment was entered accordingly.

On appeal, the court of appeals affirmed the judgment of the district court. The court of appeals was equally divided, however, over whether chapter 91A was properly applied to this case.

We granted MAPCO Gas's application for further review to consider: 1) whether the district court erred by ruling that MAPCO Gas breached an employment contract with Dallenbach by refusing to pay him a 1985 bonus calculated by the 1985 bonus formula; and 2) whether the district court erred by applying Iowa Code chapter 91A to this case.

II. The breach of contract issue. Whether an oral contract existed, what its terms were, and whether it was breached ordinarily are questions for the trier of fact. See, e.g., Peoples State Savings Bank of Baxter v. Cross, 197 Iowa 750, 754-55, 198 N.W. 70, 71-72 (1924); Howard v. Dickinson, 167 Iowa 157, 160, 149 N.W. 69, 70 (1914).

The district court found that MAPCO Gas was contractually obligated to pay Dallenbach a 1985 bonus calculated pursuant to the 1985 formula, and also found that MAPCO Gas breached the contract by refusing to pay that bonus. These findings are supported by substantial, though not uncontradicted, record evidence. The district court was within its discretion in resolving the conflicts in the evidence in favor of Dallenbach.

MAPCO Gas attempts to upset the district court's findings by relying on Drake v. Block, 247 Iowa 517, 74 N.W.2d 577 (1956). In Drake, the plaintiffs were former at will employees of the defendant. Id. at 519-21, 74 N.W.2d at 579-80. The employment had been based on an oral contract. Id. at 520, 74 N.W.2d at 579. When the plaintiffs were fired, they sued for salary, vacation pay, and bonuses allegedly owed them. Id. at 519, 74 N.W.2d at 579. In reversing a jury...