Knight v. Electric Household Utilities Corporation

• Decision Date: 05 March 1943
• Citation: Knight v. Electric Household Utilities Corporation, 133 N.J.Eq. 87, 30 A.2d 585 (N.J. Ch. 1943)
• Docket Number: 149/141
• Court: New Jersey Court of Chancery
• Parties: WILLIAM H. KNIGHT, complainant, v. ELECTRIC HOUSEHOLD UTILITIES CORPORATION, defendant

30 A.2d 585

KNIGHT

v.ELECTRIC HOUSEHOLD UTILITIES CORPORATION.

149/141.

Court of Chancery of New Jersey.

March 5, 1943.

Suit by William H. Knight against Electric Household Utilities Corporation to reform an employment contract.

Decree in accordance with opinion.

1.Where a party has an election between rights which are mutually exclusive, he will be confined to that which he first adopts.The commencement of an action based upon one of the rights is conclusive evidence of an election.

2.After a party becomes aware of a mistake in a written contract, if he acquiesces in the contract as written, he loses his right to reformation.

3.In order that the commencement of an action shall bar another remedy which the prosecuting party may have, the remedies must proceed from opposite and irreconcilable claims of right and must be so inconsistent that a party cannot logically assume to follow one without renouncing the other.

4.Plaintiff prosecuted an action on a contract to judgment which was rendered for defendant.He then began suit for reformation of the contract.Held, that the judgment did not bar the suit for reformation since the plaintiff could not have obtained reformation in his original action.

Hanies & Chanalis and Patrick J. Maloney, all of Newark, for complainant.

Smith & Slingerland, of Newark, for defendant.

BIGELOW, Vice Chancellor.

The case is before the Court on bill, answer in lieu of plea, replication and stipulation of facts.On February 4, 1939, the defendant employed the complainant as its eastern division manager for an indefinite term and agreed to pay him certain compensation.At complainant's request, the defendant, under date of February 7, wrote complainant a letter confirming the agreement and setting forth its terms.Complainant continued in the employ of the defendant until December 31, 1941.The bill shows that the confirmatory letter, either through oversight or by the defendant's deliberate intention, failed accurately to state the terms of employment; that complainant did not observe this fact until January, 1942.He prays that the written contract be reformed so as to state the real agreement between the parties.

The mere circumstance that a writing has been made by one of the parties to a contract and communicated to the other, does not make that writing the sole memorial of the transaction.The parol evidence rule does not apply unless the parties adopted the writing as their contract.In the absence of such adoption, the contract which is enforceable at law is the verbal agreement, proveable by the oral testimony of witnesses according to their recollection, and there is no written contract which need be reformed.2 Will.Con. § 633;5 Wig. Ev. § 2429.However, the parties before me concur that their agreement was integrated in the letter of February 7; that the letter constitutes a written contract.

The defendant's plea shows that complainant instituted an action in the New Jersey Supreme Court upon the contract as embodied in the letter and prosecuted the suit to judgment which was rendered in favor of defendant.Thus, says defendant, the complainant ratified the agreement as expressed in the letter and abandoned any right to have it reformed.And further, that the judgment is a complete and final adjudication of the controversy between the parties.

The pertinent parts of the letter read as follows:

‘Confirming our conversation of February 4, 1939, we wish to employ you as our Eastern Division Manager at a guaranteed income of $1250.00 per month, no fixed term, to be paid in the following manner:

‘1.A salary of $625.00 per month, payable 15th and last day of each month.

‘2.A commission of 2% on all net sales made each calendar month in 1939, during which you are employed, up to the amount of such sales made in like calendar month of 1938.On all net sales made in each calendar month of 1939 in excess of such sales made in like calendar month of 1938, we will pay you a commission of 1%.Said commissions to be paid on or before the 21st of the following month.

‘3.The salary of $625.00 per month will be deducted from the total commissions earned.

‘4.The commission of 1% on all net sales in excess of like month of 1938 will be paid when expenses do not excess 15% of net sales made in any calendar month of 1939.’

Complainant prays that paragraphs 1 and 3 be reformed by substituting $1,250 in the place of $625 as the amount of the monthly salary.Defendant concedes that the parties intended complainant's salary to be $1,250 per month, but this mistake is of no immediate importance since complainant actually was paid that sum each month he remained in defendant's employ.

The controversy centers in paragraph 2 of the letter, which complainant prays be reformed to read: ‘A commission of 2 percent. on all net sales made each calendar month in 1939 and thereafter as long as you are employed by the company.On all net sales made in each calendar month of 1939 and thereafter, in excess of such sales made in like calendar month of 1938, we will pay you a commission of one percent.Said commissions are to be paid on or before the 21st day of the following month.’

Finally, the bill prays that the fourth paragraph be expanded so as to cover not only months of 1939 but subsequent months.

It will be observed that reformation, if made, would have two distinct effects.First, it would entitle complainant to commissions on sales made in 1940 and 1941, as well as on sales made in 1939.Second, while under the contract as written, the commission on sales in excess of 1938 sales was only one percent., under the reformed contract the commission on such excess sales would be one percent. plus 2 percent., or 3 percent. in all.

The complaint in the Supreme Court showed that complainant had been paid in full for all services rendered in 1939 and that he was entitled to receive, under the agreement, for the years 1940 and 1941, $39,857, of which he had been paid $30,000 (the salary at $1,250...