Gaines v. Jones

• Court: U.S. Court of Appeals — Eighth Circuit
• Writing for the Court: VAN OOSTERHOUT, Senior Circuit , and LAY and ROSS, Circuit
• Citation: Gaines v. Jones, 486 F.2d 39 (8th Cir. 1973)
• Decision Date: 18 October 1973
• Docket Number: No. 73-1090.,73-1090.
• Parties: C. Ed GAINES, Appellant, v. C. W. JONES, et al., Appellees.

486 F.2d 39 (1973)

C. Ed GAINES, Appellant, v. C. W. JONES, et al., Appellees.

No. 73-1090.

United States Court of Appeals, Eighth Circuit.

Submitted September 11, 1973.

Decided October 18, 1973.

Rehearing Denied November 8, 1973.

Charles W. Medley, Farmington, Mo., for appellant.

Harry P. Thomson, Jr., Kansas City, Mo., for appellee.

Before VAN OOSTERHOUT, Senior Circuit Judge, and LAY and ROSS, Circuit Judges.

LAY, Circuit Judge.

Under the terms of a written contract the plaintiff, C. Ed Gaines, was employed from October 1, 1969, to December 31, 1971, by the defendants C. W. Jones and C. W. Jones and Jones Investment Company d/b/a Summit Homes and Jomaco, Inc. Gaines' services were terminated on May 15, 1970, and he subsequently sought damages for the alleged breach of contract by the defendants. The contract contained a liquidated damages clause that required the defendants to pay plaintiff $75,000 in the event Gaines was discharged within the first year.

The trial was held, with jury waived, before the district court, the Honorable John W. Oliver presiding. The court held in favor of the defendants on alternative grounds. The district court found that plaintiff had failed to prove performance, that defendants had been induced to sign the contract through fraudulent misrepresentations, and that the liquidated damages clause of the contract was unenforceable as a penalty clause. Alternatively, the trial court found that the contract was void because of a mutual mistake of fact as to what duties plaintiff was to perform under the contract. We find that the district court ruling was clearly erroneous.

Defendants owned approximately 100 acres of land in Independence, Missouri, which they wished to develop. Defendant Jones contacted his tax attorney, Sylvanus Felix, to discuss an apartment project for the land. Among other things, Felix recommended to Jones that he consider conventional rather than FHA financing because conventional financing would provide a higher per acre value for the land. In response to Jones' request, Felix also recommended Gaines as a suitable person to manage the real estate operation so that Jones would be free to pursue more leisure activities. Felix had the following to say of plaintiff:

"Well, there is only one person that I know that could possibly fit into your category. I don\'t know whether he is what you would want or not and this one person is a very close friend of mine. I\'ve known him for many years and he\'s only been in the real estate business possibly eight or nine years. He was head of his own big printing company, up until 1960 when he got into financial difficulties and had to give up his company and lose it, and sometime after that, why, he went into the — went into the real estate business.

"He has considerable experience in all phases of real estate activities, including sub-dividing and selling land, building houses and has assisted and worked on apartment houses and these John Hancock loans.

"But there are a lot of things that he would have to have guidance in, but if you want a man that you can take, he might be interested in coming with you. It would have to be some sort of an incentive arrangement." (Our emphasis).

Subsequently, the parties met to work out the terms of the contract. Plaintiff commenced working for defendants on October 1, 1969, although the contract was not actually signed until December 7, 1969.

Plaintiff's duties under the contract drawn by Jones and his attorney were specifically written out as follows:

"GAINES shall render the following services to JONES, SUMMIT, JOMACO, and GLENDALE DEVELOPMENT CO.:

(1) Assist in evaluating and negotiating purchase of income and/or non-income improved and/or unimproved real properties.

(2) Negotiate and handle sales of properties presently owned, or hereafter acquired by any of them, subject only to advance approval of the price, terms and conditions of sale.

(3) As directed, handle and supervise subdivision development of presently owned unimproved real properties and those acquired in the future.

(4) Generally oversee all construction.

(5) Generally supervise the renting of all apartments constructed by Glendale Development Co.

(6) Do all other things directed by them relating to the duties set forth above."

It is undisputed that plaintiff's duties included the handling of financing for the apartment project. However, the rub came when Gaines was not successful in his attempts to secure financing. Defendants assert that it became evident that Gaines was not competent to handle loan negotiations for a multi-million dollar project and generally failed in his performance. Gaines, however, contends he did everything that was ever requested of him and that he performed under the contract as written.

Defendants did not offer any evidence. They insist that plaintiff simply failed to make out a prima facie case. We must disagree. Under Missouri law plaintiff must prove only that he substantially performed his part of the contract up to the time he was prevented from doing so by defendants. At this point the burden shifts to the employer to show that the discharge was for good cause. Meyer v. Weber, 233 Mo.App. 832, 109 S.W.2d 702, 706-707 (1937).¹

The trial judge made findings of fact and on this basis determined that plaintiff did not in fact perform his contract and that he was unable to perform the duties contemplated by the parties. We are thus dealing with the question of whether the trial judge's findings are clearly erroneous. See United States v. United States Gypsum Co., 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746 (1948).

Upon review of the record we conclude that the evidence does not support the trial judge's conclusion that plaintiff failed to perform under the terms of the contract. On the contrary, the evidence demonstrates substantial performance and that the defendants have failed to come forward with any evidence of justification for discharge.

We think it well settled law that performance under a personal service contract requires only that a party perform in a good and workmanlike manner, and unless an employee has expressly agreed to secure particular results, the results of his performance are not material. This was the early announced doctrine in Missouri and has generally been followed elsewhere. See, e. g., Middendorf v. Schreiber, 150 Mo.App. 536, 131 S.W. 122, 123 (1910); Dallas Hotel Co. v. Lackey, 203 S.W.2d 557, 562 (Tex.App.1947); Morris v. Muller, 113 N.J.L. 46, 172 A. 63, 64-65 (N.J.Ct.App.1934); 56 C.J.S. Master & Servant § 69 (1948). In Middendorf v. Schreiber, supra, plaintiff was hired by defendant to serve as a jockey for a term of three years. Early in the second year, plaintiff was fired. The defendant attempted to justify the discharge on the basis that plaintiff had turned out to be an incompetent jockey, primarily because he did not win any races. The court held for plaintiff, reasoning that although plaintiff had contracted to perform in a good and workmanlike manner, he did not necessarily warrant that he would win or that he possessed extraordinary skill. It was sufficient that he "possessed and exercised that degree of skill, knowledge, and ability as a jockey which is usually attained and employed by other jockeys." Id. at 123 of 131 S.W. His obligation, unless the contract had expressly required more, was "to be determined by reference to the manner in which other ordinarily skillful jockeys performed the same service." Id.

In concluding that Gaines failed to perform, the district court found, inter alia, that plaintiff's duties under the contract included arranging for a multimillion dollar loan for the apartment project; that plaintiff only contacted two financial institutions in his attempts to secure financing; that plaintiff never attempted to secure FHA financing; that plaintiff had no written communications with any financial institutions; that plaintiff never made an accurate cost estimate of the project to be submitted to potential lenders; that plaintiff had no prior experience with large apartment developments; and that plaintiff had never before negotiated multimillion dollar loans.

As we view the entire record, we cannot agree that these findings established plaintiff's failure and inability to perform. First, the written contract spells out the obligations of the parties, and although plaintiff orally understood he would work on the financing arrangements for the apartment project, the contract itself is silent as to this being a specific duty. More important, the contract clearly does not require success in obtaining such financing.

Second, there is no evidence that Jones expected plaintiff to exhaust all possible sources in his attempts to secure financing. Plaintiff contacted two companies and felt it was against defendants' interest to engage in further "loan shopping."

Third, the undisputed evidence is that plaintiff did not seek FHA financing because defendant directed him not to do so.²

The evidence shows that defendants were interested only in a "John Hancock" loan wherein a sale and leaseback arrangement was involved.

Fourth, Jones himself admitted that it was not his custom to make formal written applications for loans. He would "go down and talk to them." This plaintiff did with two financial institutions. In addition, the evidence is that plaintiff mailed plans to the Glen Justice Mortgage Company and met with representatives of the Charles Curry Company on several occasions. Plaintiff obtained bids from subcontractors and attempted cost estimates by getting a cost per square foot estimate. There is no testimony which demonstrates this was improper performance.

Fifth, plaintiff's past job experience was accurately represented. He never represented that he had previously negotiated multi-million dollar loans or that he had experience with large apartment complexes. On the other hand, there was evidence that his...