French v. Sabey Corp.

• Decision Date: 26 February 1998
• Docket Number: No. 65221-0,65221-0
• Court: Washington Supreme Court
• Parties: , 13 IER Cases 1329 Alfred G. FRENCH, Petitioner, v. SABEY CORPORATION, a Washington corporation, Respondent.

Page 547

134 Wn.2d 547

951 P.2d 260, 13 IER Cases 1329

Alfred G. FRENCH, Petitioner, v. SABEY CORPORATION, a Washington corporation, Respondent.

No. 65221-0.

Supreme Court of Washington,

En Banc.

Argued Jan. 31, 1998.

Decided Feb. 26, 1998.

Powell & Morris, William Powell, Rosanna Peterson, Spokane, for Petitioner

Lukins & Annis, Michael Hines, Spokane, for Respondent.

TALMADGE, Justice.

We are asked to decide if the statute of

frauds, RCW 19.36.010, requires a personal services contract of a set duration in excess of one year to be in writing if the contract is terminable on six months' notice or is partially performed. Neither partial performance nor the fact that a party may at its option terminate the contract within a year relieves the parties of the statutory obligation to put a personal services agreement in writing. The personal services contract here was void because it violated RCW 19.36.010. We affirm the trial court's summary judgment in favor of Sabey Corporation.

ISSUES

1. Is an oral contract for personal services of a fixed term in excess of one year subject to the statute of frauds if it is terminable at will within a year?

2. Is an oral contract for personal services subject to the statute of frauds if it has been partly performed?

FACTS

In 1988, Alfred French was the president and 25 percent owner of Lad Management Services, Inc. and Pacific Maintenance Company, which managed and served the Northtown Shopping Mall in Spokane. Dixon Investment Company (Dixon) owned 50 percent of each company and the Northtown Shopping Mall as well. Dixon requested French's assistance in selling the Mall. Ultimately, French helped arrange Dixon's sale of the Mall to Sabey Corporation (Sabey). As part of the sale, Sabey also bought Lad Management Services, Inc. and Pacific Maintenance Company.

To assure continuity in Mall operation, Sabey offered to hire French as vice president of Sabey's retail division. Negotiations between French and Sabey ensued. French claims Sabey agreed to the following terms of employment at a meeting on October 18, 1988:

1. Employment for a term of five years, with provision for renewal for an additional five years.

2. Termination at the option of either party on six months' written notice.

3. Severance compensation equal to 12 months' salary if Sabey terminated him.

4. Sabey would provide the same benefits available to other Sabey executive employees.

5. Sabey would provide club memberships, professional organization memberships, and other costs and benefits appropriate for an executive.

Clerk's Papers at 48. French had another meeting with Sabey's representative six days later, at which he presented written terms of employment he himself had prepared in a letter dated October 24, 1988. The written terms encompassed the above-referenced terms, and were more detailed. However, the letter spoke in terms of being a proposal by French to Sabey, thereby requiring Sabey's subsequent acceptance:

I would like to make the following comments and proposal.

....

Your proposal is that I head up the retail division with all retail operations being my responsibility.

....

The final attachments, Exhibits "C," "D," and "E," are outlines for employment agreements for myself, Tom and Larry.[ ¹] Upon your acceptance of the proposals attached we shall enter into the employment agreements and proceed to make the transfer of operations and the establishment of the operational entity desired.

Clerk's Papers at 41-42. French averred in an affidavit Sabey's representative orally agreed to the terms of French began working for Sabey on November 1, 1988. For the next 11 months he commuted between Spokane and Seattle. He subsequently relocated to Seattle. He testified Sabey complied with all the terms of employment in the October 24, 1988 letter. On October 9, 1989, without prior notice, Sabey terminated French's employment.

                employment French presented to him at this second meeting:  "Mr. Taylor [Sabey's representative] agreed to the terms of employment of all three of us as outlined in my summaries."   Clerk's Papers at 49.  Sabey contends it never agreed to all of the terms of the October 24, 1988 letter, but it submitted no evidence controverting French's affidavit.  No Sabey representative ever signed the terms of employment letter French had prepared, however
                

On October 7, 1992, French filed a complaint against Sabey, alleging that pursuant to the terms of his employment he was entitled to 6 months' notice before termination and therefore 6 months' contract, of additional pay ($60,000); 12 months' severance pay ($120,000); relocation and housing expenses ($13,725); automobile allowance ($6,500); compensation for medical insurance for 6 month notice period ($1,500); and prejudgment interest. Sabey answered, denying the existence of a contract with French.

Sabey moved for partial summary judgment on the basis of the statute of frauds. For purposes of summary judgment, the parties accepted the proposition the oral contract was for a term of five years, terminable by either party on six months' notice. The trial court granted the motion and subsequently certified its judgment as appealable under CR 54(b). The Court of Appeals affirmed the judgment, French v. Sabey Corp., 85 Wash.App. 164, 931 P.2d 204 (1997), and we granted review.

ANALYSIS

The statute of frauds provides, in pertinent part:

In the following cases, specified in this section, any agreement, contract and promise shall be void, unless such agreement, contract or promise, or some note or memorandum thereof, be in writing, and signed by the party to be charged therewith, or by some person thereunto by him lawfully authorized RCW 19.36.010. This portion of the statute has existed in its present form since 1881. As we noted in Dudley v. Boise Cascade Corp., 76 Wash.2d 466, 470, 457 P.2d 586 (1969):

that is to say: (1) Every agreement by its terms is not to be performed in one year from the making thereof[.]

The general rule, almost universally adhered to, is that a contract for personal services which by its terms is not to be performed within a year must be in writing. See Building Serv. Employees Int'l Union Lodge 6 v. Seattle Hosp. Council, 18 Wash.2d 186, 138 P.2d 891 (1943); Cope v. School Dist. 122, 149 Wash. 76, 270 P. 120 (1928); Union Sav. & Trust Co. of Seattle v. Krumm, 88 Wash. 20, 152 P. 681 (1915); 49 Am.Jur. Statute of Frauds § 52, at 410 (1943); 3 Williston, Contracts § 495, at 585 (3d ed.1960).

Although Sabey does not deny the existence of an oral contract of employment or the documents French prepared setting forth French's version of the terms of his employment, Sabey argues, and both the trial court and Court of Appeals agreed, that any agreement between Sabey and French is void because Sabey never agreed to all of the terms of French's October 24, 1988 proposal and never signed any agreement. French makes two arguments in response. First, he asserts because his employment relationship was terminable at will, it qualifies as a contract for an indeterminate period, and is therefore not governed by the statute of frauds. Second, he asserts his part performance of the unsigned terms of employment takes his claim out of the statute.

A. Terminable Within a Year Exception to Statute of Frauds

French contends that RCW 19.36.010 does not apply to this oral employment contract because it could be performed within a year. Notwithstanding the five-year term of the alleged agreement, French argues the ability of one of the parties to terminate the agreement on six months' In numerous cases, Washington courts have held that a contractual provision allowing early termination of a contract of fixed duration exceeding a year, or the existence of a possible excuse to performance, does not take the agreement out of the statute of frauds. Dudley v. Boise Cascade Corp., 76 Wash.2d 466, 457 P.2d 586 (possible death, disability, or business discontinuation within year does not excuse performance); Lectus, Inc. v. Rainier Nat'l Bank, 97 Wash.2d 584, 647 P.2d 1001 (1982); Greaves v. Medical Imaging Systems, Inc., 124 Wash.2d 389, 879 P.2d 276 (1994) (five-year employment contract subject to termination for cause); Klinke v. Famous Recipe Fried Chicken, Inc., 24 Wash.App. 202, 600 P.2d 1034 (1979), aff'd, 94 Wash.2d 255, 616 P.2d 644 (1980). We adhere to the general rule expressed in Klinke:

notice takes the agreement out of the statute of frauds, citing Sargent v. Drew-English, Inc., 12 Wash.2d 320, 328, 121 P.2d 373 (1942); von Herberg v. von Herberg, 6 Wash.2d 100, 106 P.2d 737 (1940); Peabody v. Pioneer Sand & Gravel Co., 164 Wash. 26, 2 P.2d 714 (1931); Barash v. Robinson, 142 Wash. 118, 252 P. 680 (1927). It is noteworthy that the agreements in each of these cases were of indefinite duration as well as being terminable at will. The putative agreement here was for a definite term of five years.

"It is the general rule that the fact that either of the parties may have an option to put an end to a contract within a year does not take it out of the operation of the statute if, independent of the exercise of such a power, the agreement cannot be performed within a year. The fact that the contract may be terminated or further performance rendered impossible does not take it out of the statute. To be discharged from liability under a contract is not to perform it; when once the contract exceeds the year, the circumstance that it is defeasible will not make it other than a contract for more than a year. It cannot be said that the agreement would be fully performed by its termination under the option, but rather that in such an event, the performance of the agreement was frustrated. Of course, if no definite time for the duration of the contract is fixed and it may be terminated at will or by a certain notice, which will (Footnotes omitted.) 72 Am.Jur.2d Statute of Frauds § 16, at 579-80 (1974). See also 3 S....