Kessloff v. Pearson
| Decision Date | 27 July 1951 |
| Citation | 233 P.2d 899,37 Cal.2d 609 |
| Court | California Supreme Court |
| Parties | KESSLOFF v. PEARSON et al. L. A. 21918. |
Aaron Sapiro and Hyman O. Danoff, Los Angeles, for appellant.
Louis Licht, Mitchell, Silberberg & Knupp and Arthur Groman, all of Los Angeles, for respondent.
Upon the termination of a written contract of employment the plaintiff commenced an action for declaratory relief and an accounting. After issue joined the trial court sustained an objection to the introduction of evidence on the ground that the complaint did not state a cause of action for declaratory relief. The plaintiff appealed from a judgment dismissing the action.
The complaint discloses the following:
The defendants were engaged in the manufacture and sale of candy under the name of Pearson Candy Company. On July 1, 1944, the plaintiff and Edward F. Pearson, herein designated as the defendant, entered into a written contract whereby the plaintiff was employed to make candy and advance the interests of the company for which he was to receive his regular weekly salary, to be agreed upon orally, and ten per cent of the 'net profits earned by the Pearson Candy Co.' The agreement specified that the plaintiff was to have nothing to do with the management of the business or of the employees, but that his duties were to be confined to candy making and its supervision. Profits were to be determined at the end of one year from the date of the contract and each year of renewal, and the plaintiff's share was to be paid to him by the company. The agreement was renewable by mutual consent each year for three years at progressively higher percentages of the profits 15% for the second year, 20% for the third year, and 25% for the fourth year. The plaintiff continued in employment under the contract until July 1, 1948, and thereafter under different terms and conditions until February 26, 1949, when his employment terminated. At the close of the first and each succeeding year under the contract the plaintiff received from the defendant a sum represented to be his share of the profits. He was told that he was not entitled to an explanation as to how the sum was computed but was obligated to accept what the defendant in his own judgment determined was the proper amount. The plaintiff specifies large sums of money paid to various persons including Fannie Pearson, the defendant's mother who was not employed, in excess of $10,000 per year; G. Florence Permar in addition to regard salary in excess of $5,000 per year; Dan Perason, a brother who was not employed except for a limited period, in excess of $40,000 in the aggregate; and the expenditure of large sums for automobiles and other articles for the defendant and the members of his family which had no connection with the business, all of which were improperly charged as expenses of the business before the computation of net earnings in arriving at the annual amounts due to the plaintiff under the contract. The plaintiff has been denied access to and has been unable to examine the books of the company. On termination of the employment he attempted to obtain a correct statement of the earnings and expenditures during the period of the contract but the defendant refused to furnish any statement, account or explanation of the alleged excess payments. The plaintiff alleged the existence of an actual dispute and controversy as to the proper computation of net profits in determining the amounts due to him. He asked for a declaration of the parties' rights and duties under the contract; for a full and complete accounting of the gross earnings and business expenditures of the company; for a determination of the net earnings and the amounts due to him; for judgment therefor, and any other relief to which he might be entitled.
The defendants filed an amended answer. They admitted the contract, joined issue as to the matters of accounting and method of computation of net profits, and set up certain defenses. They alleged that the candy company was a co-partnership consisting of Edward F. Pearson, Dan Pearson, Fannie Pearson, and G. Florence Permar; admitted that the copartners withdrew various amounts representing their shares of the profits; alleged the propriety of deductions therefor and of profits from jobbing operations, and denied that there were improper deductions from gross earnings before the computation of the plaintiff's share of net profits. The defendants alleged other defenses including insufficiency of the complaint to state a cause of action; illegality of the agreement as in violation of the Stabilization Act of 1942, 50 U.S.C.A. Appendix, § 961 et seq., estoppel, ratification and waiver; account stated; unclean hands because of the alleged violation of the Stabilization Act; and laches. The defendants sought a declaration that the contract was illegal and void and that the plaintiff had received all sums due to him thereunder. The defendants also filed a cross-complaint for reformation of the contract alleging that by mutual mistake it did not express the true intention of the parties as to how the percentage compensation to the plaintiff was to be computed; that it did not truly identify the parties to the writing; that the parties intended that there should be deducted from operating profits a reasonable compensation for the services and capital contributed by the partners and the individual income taxes paid by them; and that the...
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