Erickson v. American Golf Corp.

Citation194 Or.App. 672,96 P.3d 843
PartiesJohn A. ERICKSON, Respondent-Cross-Appellant, v. AMERICAN GOLF CORPORATION, a foreign corporation, Appellant-Cross-Respondent.
Decision Date25 August 2004
CourtCourt of Appeals of Oregon

Gary Roberts, Portland, argued the cause for appellant-cross-respondent. With him on the brief was Schwabe, Williamson & Wyatt, P.C.

Michael A. Cox, Portland, argued the cause and filed the briefs for respondent-cross-appellant.

Before HASELTON, Presiding Judge, and LINDER and WOLLHEIM, Judges.


Plaintiff was employed by defendant American Golf Corporation as general manager of the Oregon Golf Club. After his employment was terminated in 2000, he brought this breach of contract and statutory unpaid wages action, claiming that he had not been paid the full amount of his 1996 and 1999 bonuses. The case was tried to a jury, which returned a verdict for plaintiff. Defendant appeals, arguing that the trial court erred in giving a particular instruction to the jury and in granting a partial directed verdict against defendant's affirmative defenses of accord and satisfaction and waiver. Plaintiff cross-appeals, assigning error to the trial court's refusal to award a statutory penalty based on plaintiff's favorable verdict on the wage claim. See ORS 652.150. We reverse on appeal, concluding that the challenged jury instruction was properly given, but that defendant's affirmative defenses were erroneously withdrawn from the jury. Because that disposition requires a new trial, we dismiss the cross-appeal as moot.

We state the facts, and all reasonable inferences that they support, in the light most favorable to defendant, the party opposing the directed verdict motion. Vandermay v. Clayton, 328 Or. 646, 648, 984 P.2d 272 (1999). Plaintiff, who had worked as the manager of one of defendant's golf clubs in Texas, transferred to Oregon to manage the Oregon Golf Club after defendant purchased it in 1995. Around the time of plaintiff's transfer to Oregon, defendant instituted a new bonus and profit-sharing plan that contained two components: an annual bonus beginning in 1996 and a three-year long-term bonus to be paid in 1999. For the annual bonus, if a club achieved a certain predetermined proportion of its profit goals, the manager was to receive a "base bonus," which was a percentage of the manager's annual base salary. If the club exceeded its profit goals, the annual bonus was to further include a "threshold bonus," which consisted of a percentage of the club's excess profits, with the percentage increasing progressively as the profits exceeded that club's targets. The amount of the long-term bonus was to be based on an average of the bonuses paid in 1996, 1997, and 1998, which was then subject to a multiplier based on the extent to which a particular region had reached or exceeded its profit goals.

Each general manager received a document describing the plan in detail. The document identified the formula to be used to calculate the amount of the annual bonus and stated expressly that there was no cap on the potential bonus that a general manager could earn. In addition to that document, each general manager also received a one-page worksheet for calculating his or her individual annual bonus that specified the relevant targets for that manager's property. At the bottom of that worksheet was the statement "[b]onus plan is subject to approval by the executive committee." To receive a bonus at the end of the year, the general managers were required to complete the worksheet and submit it to the executive committee. In past years, individual bonuses were paid only after committee review and approval of each manager's worksheet.

Plaintiff received his worksheet after both the plan document and the formula for plaintiff's annual bonus had been approved by defendant's executive committee. In its first year under plaintiff's management, the Oregon Golf Club substantially exceeded its profit targets. According to the bonus plan and the calculations set forth in plaintiff's worksheet, plaintiff's annual bonus worked out to approximately $128,000, which would have been the largest annual bonus, by a significant margin, ever paid to a general manager by defendant. When plaintiff submitted his worksheet containing the $128,000 figure to Seidl, his regional manager, Seidl told plaintiff that he was concerned that submitting a bonus for that amount "would be a risk in terms of being approved." Seidl suggested that, as an alternative, plaintiff ask for a lower bonus and accept an increase in his base pay for the next year, which would give him a potentially greater future bonus as well. When plaintiff asked Seidl what would happen if he were to submit the $128,000 figure, Seidl responded, "[T]he company's got to do what they got to do." According to Seidl, he meant only that if plaintiff did not submit a lower bonus figure, plaintiff risked having the executive committee reduce it. Plaintiff, however, believed that Seidl was warning him that a request for a $128,000 bonus would place his job at risk.

Although plaintiff continued to believe that he was entitled under the plan to a bonus of $128,000, he signed and submitted a bonus worksheet for a bonus of $81,561. Plaintiff also agreed to a 10 percent increase in salary for the next year, thereby increasing his bonus potential in the future. The executive committee approved the bonus in the amount submitted by plaintiff and paid plaintiff accordingly. Plaintiff also received the 10 percent raise, as agreed, even though the average base pay increase that year for other general managers was three percent. Three years later, plaintiff's long-term bonus was calculated using the $81,561 bonus that plaintiff had accepted, rather than the $128,000 bonus to which plaintiff believed he had been entitled. Plaintiff accepted the resulting long-term bonus amount without protest.

Plaintiff's employment with defendant terminated in September 2000 for reasons unrelated to the present dispute. Plaintiff then brought this action, alleging that, by failing to pay plaintiff the full $128,000 bonus in 1996 and by not using that figure to calculate his long-term bonus in 1999, defendant breached the employment contract with plaintiff and failed to pay plaintiff wages that were due.1 In addition to the unpaid wages, plaintiff sought a statutory penalty for nonpayment of those wages pursuant to ORS 652.150. In its answer, defendant asserted, among other things, affirmative defenses of accord and satisfaction and waiver. Plaintiff responded by filing a motion for a directed verdict to exclude those defenses at trial, which the trial court granted.

The case was tried to a jury. Plaintiff's principal theory was that he interpreted the disclaimer on the worksheet — "bonus plan is subject to approval by executive committee" — to require only approval of the plan formula, not of the actual payout amount based on that formula. Defendant countered with its interpretation of the contract: that the disclaimer required executive committee approval of the individual annual bonus payout amounts. The jury returned a verdict for plaintiff. The trial court awarded damages for breach of contract but declined to assess penalties based on plaintiff's wage claim. This appeal followed.

Defendant's first assignment of error raises the issue whether a trial court may properly advise a jury that, if it cannot determine the parties' intent as to ambiguous terms of a contract, the jury should construe the contract against the drafter. In this case, over defendant's objection, the trial court gave the following jury instruction:

"A breach of contract occurs when a party fails to perform as required by a contract. And in determining the intent of the parties, you may consider the conduct relating to disputed terms of the contract before any controversy arose.
"* * * *
"The parties have put forward different interpretations of the contract at issue. In interpreting the contract, you are to determine what the parties intended by agreeing to the terms in question.
"To determine intent, you look to the language of the contract and other relevant circumstances. If the parties' intent can't be determined, the term must be construed against the drafter of the contract. In this case the drafter was the defendant, American Golf Corporation."

(Emphasis added.)

On appeal, defendant renews its challenge to that instruction, taking the position that it is never proper for a trial court to give such an instruction to a jury in a breach of contract action. Defendant reasons that, because maxims of construction bear on the legal interpretation of a contract and a jury's role is to decide only factual issues regarding the parties' intent, maxims of construction are not "relevant" to the jury's deliberations. Plaintiff, in response, essentially argues that juries properly may be instructed as to the legal principles that bear on the dispute that they must resolve.2

We reverse for errors in jury instructions if a given instruction "`probably created an erroneous impression of the law in the minds of the jurors which affected the outcome of the case.'" Nolan v. Mt. Bachelor, Inc., 317 Or. 328, 337, 856 P.2d 305 (1993) (quoting Waterway Terminals v. P.S. Lord, 256 Or. 361, 370, 474 P.2d 309 (1970)); Stiles v. Freemotion, Inc., 185 Or.App. 393, 395, 59 P.3d 548 (2002),rev. den., 335 Or. 504, 72 P.3d 636 (2003). We do not agree that an instruction of this kind has that effect. In Banister Continental Corp. v. NW Pipeline Corp., 76 Or.App. 282, 289, 709 P.2d 1103 (1985),vac'd, 301 Or. 763, 724 P.2d 822 (1986) (Banister I), we directly addressed the same issue and concluded:

"Why can a jury not be appropriately instructed as to [a correct] legal rule? It would not be wrong, we think, to tell a jury, in essence, `You are the judges of the facts. The issue here is

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