Jensen v. Pure Plant Food Intern., Ltd.

• Decision Date: 05 January 1979
• Docket Number: No. 12020,12020
• Citation: 274 N.W.2d 261
• Parties: Gordon JENSEN, Plaintiff and Respondent, v. PURE PLANT FOOD INTERNATIONAL, LIMITED, a corporation, Defendant and Appellant.
• Court: South Dakota Supreme Court

Page 261

274 N.W.2d 261

Gordon JENSEN, Plaintiff and Respondent, v. PURE PLANT FOOD INTERNATIONAL, LIMITED, a corporation Defendant and Appellant.

No. 12020.

Supreme Court of South Dakota.

Jan. 5, 1979.

Richard F. Staley, Sioux Falls, for plaintiff and respondent.

Mark V. Meierhenry, of Meierhenry, Devany & Krueger, Vermillion, for defendant and appellant.

PORTER, Justice.

CASE SUMMARY

This is an appeal from the judgment of the circuit court awarding the plaintiff, Gordon Jensen, $11,568.09 damages for unpaid compensation for services rendered by him to defendant, Pure Plant Food International, Limited (Pure), pursuant to an employment contract executed by them. Pure assigns various errors and requests reversal. We affirm the judgment of the trial court.

FACTS

Defendant, Pure, is a Canadian corporation engaged in the manufacture and sale of fertilizer, with its principal place of business in Sioux Falls. Plaintiff, Jensen, is a salesman who worked for Pure from July, 1971, until October, 1974. He was hired as a state program manager and was employed by written contract dated July 29, 1971, (the 1971 contract). As a state program manager he sold products directly to customers and had distributors or salesmen who worked under his direction. His territory encompassed South Dakota and Montana. Jensen's contract with Pure provided him with a salary, plus a sales bonus and profit sharing.

On February 5, 1974, Jensen was called to a meeting with Ken McLachlan, president of Pure. Jensen was given a statement of his sales for the 1972-73 fiscal year. He disagreed with the calculations on the statement because he thought he was entitled to a 2% Bonus payment on distributor orders, rather than the 1% Bonus payment indicated on the statement. McLachlan gave him no answer to his contention concerning the bonus payment, but showed Jensen a new employment contract, backdated to September, 1973, the beginning of the 1973-74 fiscal year, which excluded the profit sharing agreement present in the 1971 contract. Jensen told McLachlan that he would "have to be crazy to sign a thing like that," and walked out of the office.

On March 6, 1974, Jensen was advised by telegram that no additional fertilizer orders would be accepted, but that orders on hand at the head office would be filled. On March 20, 1974, Jensen had an interview with McLachlan to settle Jensen's claim that he was entitled to a 1% Sales bonus, $1,017, for distributor sales during fiscal year 1972-73. As a result of the conversation Jensen received a check for $1,000, which carried the words, "full and final settlement of 1973 bonus less deductions." On March 21, 1974, Jensen was asked to meet with Walter McLachlan, who was then a vice president of Pure. McLachlan offered Jensen a new employment contract, which excluded the profit sharing provision of the 1971 employment contract. Jensen commented that the contract was not backdated and McLachlan agreed. Jensen asked if the new contract would affect his past business for the fiscal year 1973-74; McLachlan said it would not, and Jensen signed it. The new contract (herein called the 1974 contract) terminated August 31, 1974. October 1, 1974, Jensen began working for another company.

In July, 1975, Jensen commenced the lawsuit from which this appeal arises. He alleged that by virtue of the terms of the 1971 employment contract, Pure owed him $25,267 in unpaid compensation for services rendered by him from August 1, 1971, through March 1, 1974. Pure, in turn, filed a counterclaim in the amount of $432.00 for fertilizer allegedly delivered Jensen and not paid for.

The jury returned a verdict for Jensen, awarding him $12,000.09 in damages, and awarded Pure $432.00 in damages pursuant to its counterclaim. Jensen was, therefore, awarded judgment in the amount of $11,568.09 plus costs, from which Pure appeals.

ISSUES

The issues dispositive of this appeal are as follows:

Issue One Did the trial court err in allowing parol evidence to be considered in determining the terms of the March 21, 1974, contract?

Issue Two Did the trial court err in denying Pure's motions for a directed verdict under the doctrine of waiver based upon the 1974 contract and accord and satisfaction?

DECISION

Issue One

We conclude that the trial court did not err in allowing parol evidence to be considered in determining the terms of the March 21, 1974, contract.

The employment contract of 1971 provided for a sales bonus and profit or loss The Company agrees to pay the Manager a "Sales Bonus" based on paid up business during the fiscal year of the Company and according to the schedule outlined in "Pure Policy"

sharing. The provisions that governed these benefits were as follows:

PROFIT OR LOSS SHARING

The State or Provincial Program Manager will receive a Profit Bonus or will forfeit Sales Bonus based on the following formula;

                          BUDGETED
                         NET PROFIT
                         ----------
                NO LOSS     10%      NO SHARE
                

For each one percent (1%) increase or decrease on the Manager's Budgeted Net Profit, the Manager will receive or forfeit ten percent (10%) of his total earned Sales Bonus.

Should Manager's Net Profit be five percent (5%) or lower, manager will forfeit entire year end Sales Bonus payment.

In contrast to the 1971 contract, the 1974 contract had no provision for profit or loss sharing and the sales bonus provision was as follows:

The company will pay the Manager a sales bonus, on the net sales paid up business, within the Managers own division, (providing that the Managers division is operating in a profit position according to the sales budget figures on booked orders, issued by the company at the end of each month.) Sales Bonus payable on the 15th. of the month following payment of the order in full according to the following schedule:

                $ 1 -- 200,000    2%
                $ 201,000 & Over  3%
                

In addition to the fact the 1974 contract had no provision for profit or loss sharing, it contained the following clauses:

All previous agreements, contracts or understandings with reference to the employment of the Manager of Pure Plant Food or as compensation for such employment are hereby cancelled, it being agreed that this agreement of the parties hereto with reference to the employment and compensation of the Manager by Pure Plant Food; all promises, undertakings, representations, agreements and understandings with reference to such employment and compensation being merged in this agreement. ("cancellation clause")

This agreement supersedes all other agreements.

It is the intention of the company to set aside a portion of the profits of the company for distribution to employees of the company. At this writing a plan is under consideration by the Board of Directors of the company, when completed each employee will be advised of the plan.

Jensen contends that in spite of the "cancellation clause" in the 1974 contract, and the $1,000 payment of March 20, 1974, he is entitled to the profit sharing as provided by the 1971 contract. Pure disagrees and argues that the 1974 contract is the final expression of the profit sharing negotiations between Pure and Jensen. Pure also contends that the "cancellation clause" of the 1974 contract cancels any unpaid profit sharing from previous years. At trial, the court allowed testimony concerning conversations between Ken and Walter McLachlan and Jensen, which took place prior to and at the time Jensen signed the 1974 contract. Pure contends that the testimony was inadmissible parol evidence because Jensen used it to add additional terms to the contract. We conclude that the testimony at issue was properly admitted in this case.

The primary rule in the construction of contracts is that the court must, if possible, ascertain and give effect to the mutual intention of the parties. . . . If the intention of the parties is not clear from the writing, then it is necessary and proper for the court to consider all the circumstances surrounding the execution of the writing and the subsequent acts of the parties.

Huffman v. Shevlin, 76 S.D. 84, 89, 72 N.W.2d 852, 855 (1955). Parol or extrinsic We conclude that the 1974 contract was ambiguous, and that the trial court properly admitted parol evidence to clarify the contract terms. After reading through the "cancellation clause" a genuine uncertainty exists as to whether it affects profit sharing benefits accruing prior to March 21, 1974. Although the clause states that all previous agreements are cancelled, the question still remains whether the parties intended that Jensen not share in the profits from that day forward or whether they meant to cancel profit sharing to which Jensen was already entitled. It was necessary, therefore, for the trial court to admit testimony to show what the parties meant when they canceled Jensen's employment compensation agreements. The parol evidence at issue was testimony given by Jensen at trial. He testified that when he met with Ken McLachlan on February 5, 1974, he was shown another employment contract backdated to September of 1973. This contract excluded profit sharing. When asked on direct examination how he responded to the new contract, Jensen replied:

evidence may not be admitted to vary the terms of a written instrument or to add to or detract from the writing. When the writing is uncertain or ambiguous, however, such evidence is admissible to explain the instrument. Christiansen v. Strand, 81 S.D. 187, 132 N.W.2d 386 (1965). "In...