Larson v. Kreiser's, Inc.

• Decision Date: 26 June 1991
• Docket Number: No. 16951,16951
• Citation: 122 Lab.Cas.P 56,472 N.W.2d 761
• Parties: 122 Lab.Cas. P 56,941, 6 Indiv.Empl.Rts.Cas. 971 David H. LARSON, Plaintiff and Appellee, v. KREISER'S, INC., Defendant and Appellant.
• Court: South Dakota Supreme Court

Page 761

472 N.W.2d 761

122 Lab.Cas. P 56,941, 6 Indiv.Empl.Rts.Cas.

971

David H. LARSON, Plaintiff and Appellee, v. KREISER'S, INC., Defendant and Appellant.

No. 16951.

Supreme Court of South Dakota.

Argued Oct. 23, 1990.

Decided June 26, 1991.

Robert J. Burns of Burns & Ford, Sioux Falls, Jonathan K. Van Patten of Vermillion, on the brief, for plaintiff and appellee.

Karen Schreier of Hagen & Wilka, Sioux Falls, Thomas K. Wilka, on the brief, for defendant and appellant.

MILLER, Chief Justice.

Kreiser's, Inc. appeals from a jury verdict in favor of David Larson in an action arising from his termination of employment with Kreiser's. We affirm in part, reverse in part, and remand. ¹

FACTS

Kreiser's, Inc. is a family-owned business in Sioux Falls, South Dakota, which sells medical supplies. Plaintiff David Larson is the son of Harold Larson, the president and chief executive officer of Kreiser's, Inc.

In 1967 (while David was in high school), David told Harold that he wanted to work at a grocery store in Sioux Falls. According to David, Harold said he did not want that and asked David to start working in the family business. David testified that it was important to Harold that the business stay in the family.

Therefore, in 1967, David began working in the warehouse, ² eventually becoming in charge of the warehouse crew, and then he began to learn the purchasing side of the business. In 1976, David was transferred to Sioux City, Iowa, to fill a sales position in a newly opened Kreiser's store. Two years later, Kreiser's general manager retired and as a result David was promoted to operations manager. He was promoted to the position of vice-president in 1981.

David testified that Harold repeatedly promised him that one day he would be president of Kreiser's.

There was no written employment contract between David and Kreiser's. There is no evidence that David was employed for a specified term. On January 12, 1987, David's employment with Kreiser's was terminated by Harold. David never served Kreiser's as president.

In 1987, David sued Kreiser's alleging breach of implied and express contract, wrongful termination, breach of fiduciary duty, and intentional infliction of emotional distress. Kreiser's counterclaimed alleging that David owed it money on account. The jury awarded David $1,225,315 in his action and Kreiser's $7,887.75 on its counterclaim. Kreiser's appealed the award to David.

ISSUE I

WHETHER THE TRIAL COURT ERRED IN GIVING AN INSTRUCTION THAT THE PROMISE OF EMPLOYMENT IN A PARTICULAR POSITION NEED NOT BE MADE AT THE INCEPTION OF EMPLOYMENT.

At trial, the court gave the following instruction to the jury:

10.

An employer who promises as part of the employment agreement to employ a person in a specified position, such as 'president', is bound by law to discharge that person only for 'good cause.'

These promises do not have to be made to the employee at the time of hiring, or be in writing, but can be verbal and can be made during the period of his employment.

If you find that defendant promised the plaintiff that he would become president and if you find a reasonable expectation of getting that position, and if you find plaintiff continued to work in reliance upon such promise, then you are instructed that there was an employment contract which could only be terminated for good cause. (Emphasis added.)

Kreiser's argues that the trial court erred in giving the foregoing instruction. They assert that an oral employment contract must offer a specific position at the inception of employment. Citing Merritt v. Edson Exp., Inc., 437 N.W.2d 528 (S.D.1989); Breen v. Dakota Gear & Joint Co., Inc., 433 N.W.2d 221 (S.D.1988); Larson I, supra.

"We review the jury instructions by construing them together and the instructions are not erroneous if when so construed they provide a full and correct statement of the law applicable to the case at bar." Frazier v. Norton, 334 N.W.2d 865, 870 (S.D.1983); State v. Grey Owl, 295 N.W.2d 748 (S.D.1980); Dwyer v. Christensen, 77 S.D. 381, 92 N.W.2d 199 (1958).

SDCL 60-4-4 provides: "An employment having no specified term may be terminated at the will of either party on notice to the other, unless otherwise provided by statute." Further, this court has held that when there is no employment contract or specified term of employment, and an employer has no established procedures for discharging employees, the employment is terminable at the will of the employer under SDCL 60-4-4. Hopes v. Black Hills Power and Light Co., 386 N.W.2d 490 (S.D.1986); Tombollo v. Dunn, 342 N.W.2d 23 (S.D.1984).

In Larson I, we held that an express or implied contract of employment may be created on the basis of an employer's oral representations, citing Zaniecki v. P.A. Bergner & Co., 143 Ill.App.3d 668, 97 Ill.Dec. 756, 493 N.E.2d 419 (1986); Terrio v. Millinocket Community Hospital, 379 A.2d 135 (Me.1977); Toussaint v. Blue Cross & Blue Shield of Michigan, 408 Mich. 579, 292 N.W.2d 880 (1980); Mers v. Dispatch Printing Co., 19 Ohio St.3d 100, 483 N.E.2d 150 (1985); Sea-Land Service, Inc. v. O'Neal, 224 Va. 343, 297 S.E.2d 647 (1982); O'Neill v. ARA Services, Inc., 457 F.Supp. 182 (E.D.Pa.1978); L. Larson, Unjust Dismissal Sec. 3.04 (1987).

Here, the trial court correctly instructed the jury that a worker who is verbally promised future promotion to a specific position in exchange for his labor is not an at-will employee under SDCL 60-4-4 and may be discharged only for cause. Merritt v. Edson Exp., Inc., 437 N.W.2d 528, 529-30 (S.D.1989); Larson I, supra.

In Merritt, we explained our holding in Larson I by stating that Kreiser's "promised [Larson] a particular position (president) if [he] continued to do a good job and stayed with the company." 437 N.W.2d at 530. The trial court echoed this reading when it instructed the jury that "if you find [Larson] continued to work in reliance upon such promise, then ... there was an employment contract which could only be terminated for good cause."

Under the facts of this case, the trial court's instruction was not error. Therefore, we affirm the trial court on this issue.

ISSUE II

WHETHER THE TRIAL COURT CORRECTLY INSTRUCTED THE JURY ON AN IMPLIED-IN-FACT CONTRACT THEORY.

The trial court instructed the jury as to the implied-in-fact theory of contract as follows:

6.

A contract may be made in any manner sufficient to show agreement. It may be oral or written, or implied from the conduct of the parties. In an oral or written contract the terms are stated by the parties. In an implied contract, they are inferred as a matter of reason and justice from the acts and conduct of the parties, any language used, and the circumstances surrounding the transaction.

Instruction No. 7 provided:

7.

A contract is implied in fact where the intention as to it is not manifested by direct or explicit words by the parties, but is determined inferred from the conduct of the parties, the language used, or the acts done by them, or other pertinent circumstances attending the transaction.

Instruction No. 8 provided:

8.

In determining whether David Larson's employment contract with Kreiser's Inc. contained an implied promise that the employer would not act arbitrarily with respect to his employment, that is, would not terminate him without good cause, you may consider the totality of the parties' relationship. Such implied agreement may be shown by the acts and conduct of the parties, interpreted in the light of the subject matter and the surrounding circumstances. You may consider facts such as (1) the duration of David Larson's employment, (2) the commendations and his promotions he received, (3) any criticism of his work, (4) any assurances he was given, (5) the personnel policies of Kreiser's Inc. acknowledged to him, and (6) any evidence tending to negate the existence of such an implied promise.

Kreiser's note that the only time that this court has recognized an implied termination "for cause only" contract is in a situation wherein an "employee handbook" contains a detailed list of exclusive grounds for employee discipline or discharge and, a mandatory and specific procedure which the employer agrees to follow prior to any employee's termination. Citing Butterfield v. Citibank of South Dakota, 437 N.W.2d 857 (S.D.1989); Osterkamp v. Alkota Mfg. Inc., 332 N.W.2d 275 (S.D.1983).

Here, the trial court specifically held that Kreiser's handbook did not meet the requirements for an implied contract pursuant to the mandates of Butterfield. It therefore granted Kreiser's motion for a directed verdict based on the employee handbook theory. Nonetheless, the trial court gave the foregoing instructions dealing with implied contracts to the jury.

It is settled law that South Dakota is an employment-at-will state. SDCL 60-4-4. Thus, any exceptions to this policy must be narrowly construed. Johnson v. Kreiser's, Inc., 433 N.W.2d 225 (S.D.1988). Therefore, it was error for the trial court to instruct the jury on an implied contract theory. The trial court's ruling directing a verdict for Kreiser's, aforesaid, was dispositive of the implied contract issue. See Butterfield, supra; Osterkamp, supra.

ISSUE III

WHETHER THE TRIAL COURT ABUSED ITS DISCRETION IN PROHIBITING KREISER'S FROM INTRODUCING EVIDENCE THAT DAVID CONVERTED ASSETS OF KREISER'S.

David took three checks made payable to Kreiser's and deposited them into his personal bank account. David admitted this and confessed judgment in the amount of $6,805.11 plus interest shortly before trial of this case. During trial (on cross-examination of David), Kreiser's sought to introduce evidence that David had converted these checks from Kreiser's. The trial court would not allow Kreiser's to impeach David with this evidence, despite his prior testimony that he "loved" the company and that he was a loyal and faithful servant of Kreiser's. The trial court determined that this was inadmissible impeachment...