Lisec v. United Airlines, Inc., No. H008551

• Court: California Court of Appeals
• Writing for the Court: PREMO; CAPACCIOLI, Acting P.J., and ELIA
• Citation: 11 Cal.Rptr.2d 689,10 Cal.App.4th 1500
• Parties: , Unempl.Ins.Rep. (CCH) P 16897A James K. LISEC, et al., Plaintiffs and Respondents, v. UNITED AIRLINES, et al., Defendants and Appellants.
• Decision Date: 02 September 1992
• Docket Number: No. H008551

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11 Cal.Rptr.2d 689 10 Cal.App.4th 1500, Unempl.Ins.Rep. (CCH) P 16897A James K. LISEC, et al., Plaintiffs and Respondents,
v.
UNITED AIRLINES, et al., Defendants and Appellants. No. H008551. Court of Appeal, Sixth District, California. Sept. 2, 1992.
Review Denied Nov. 18, 1992.
Rehearing Denied Sept. 30, 1992.

[10 Cal.App.4th 1501] William F. Hoefs, San Francisco, Kenneth L. Nissly, San Jose, Daniel P. Westman, Scott L. Gardner, and Thelen, Marrin, Johnson & Bridges, San Francisco, for defendants and appellants.

John J. Hartford, Redwood City, for plaintiffs and respondents.

PREMO, Associate Justice.

Pursuant to a judgment awarding damages for wrongful termination, appellant United Airlines, Inc. (hereafter, United), paid the amount [10 Cal.App.4th 1502] of the judgment minus withholdings for state and federal income and social security taxes. The recipients, respondents James K. Lisec and Krishan K. Jagga, ¹ refused to acknowledge full satisfaction of the judgment, claiming that the damages were neither wages nor earned

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income and therefore were not subject to withholding. Appellants Richard J. Ferris and United appeal the trial court's denial of their motion to compel acknowledgement of full satisfaction of the judgment. FACTS

Lisec and Jagga, long-term management employees of United, aggrieved when United paid a $1,000 award rather than 10 percent of estimated first-year savings for their suggestion that revenues could be increased by a liberalization of discount fare policies, sued United in 1973 for breach of contract and fraud. They won a well-reported verdict of almost $2 million at jury trial, but the verdict was reversed on appeal. (Lisec v. United Air Lines, Inc. (1978) 85 Cal.App.3d 969, 149 Cal.Rptr. 847, hereafter, Lisec I.)

While Lisec I was pending, respondents received raises and favorable job performance evaluations, and assurances from their supervisors that the suit would not affect their careers with United. Notwithstanding, United's president, appellant Ferris, disturbed by the publicity, waited on advice of counsel until the judgment was final, then in 1979 ordered their supervisors to fire Lisec and Jagga for discrediting United.

Lisec and Jagga sued on breach of contract and tort theories. After trial in 1985, the jury awarded $302,500 to Lisec and $176,500 to Jagga for breach of contract, and $1,250,000 to each plaintiff for compensatory and punitive damages for retaliatory firing in violation of public policy, breach of the implied covenant of good faith and fair dealing, and intentional infliction of emotional distress. Following Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 254 Cal.Rptr. 211, 765 P.2d 373, and Newman v. Emerson Radio Corp. (1989) 48 Cal.3d 973, 258 Cal.Rptr. 592, 772 P.2d 1059, this court reversed the tort and punitive damages award on appeal. (Lisec v. United Airlines (Aug. 29, 1990) H001969 [nonpub. opn.] hereafter, Lisec II.)

United paid Lisec and Jagga early in 1991. Including interest on the principal amount of the judgment and minus withholdings which United contends were required by federal and state law, Lisec received $361,845.63, and Jagga was paid $222,554.97. The amounts withheld were paid to the respective taxing authorities.

[10 Cal.App.4th 1503] Appellants then demanded acknowledgement of full satisfaction of judgment from respondents. (Code Civ.Proc., § 724.050.) They acknowledged partial satisfaction of judgment. (Code Civ.Proc., § 724.120.) The trial court denied appellants' motion to compel respondents to acknowledge full satisfaction of judgment, stating: "I do not think that a withholding under these circumstances is appropriate regardless of whether or not the proceeds of the judgment are taxable as income." This appeal ensued.

CONTENTION ON APPEAL

Appellants contend here, as they did in the trial court, that the damages award constituted "wages," and that federal and state law obligated United to withhold income and other payroll taxes. Appellants reason that after Foley only contract damages are available in California in a wrongful termination case based on breach of contract and breach of the implied covenant of good faith and fair dealing. Since respondents' contracts were employment contracts which obligated United to pay wages and other forms of compensation in return for services, the measure of damages consists of wages and other compensation that employees would have received if their employment had not been terminated.

Respondents counter that the damages the jury awarded were not "wages" because they were not for "services performed" by either plaintiff, ² but were for "amounts relating to services which could have been performed in the future and therefore earned but which were rendered incapable of being performed by the

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breaches of the contracts of Plaintiffs." Respondents theorize that "it appears that federal law is such that the amounts awarded to Respondents are not includable in income." However, in this proceeding they limit their discussion to the issue of withholding. "Includability, taxability, and 'withholdability' are related but nevertheless separate and distinct issues. The issue in the instant appeal has to do with 'withholdability.' " DISCUSSION

We must determine if appellants' characterization of the damages award as "wages" subject to withholding was correct.

"The basic object of damages is compensation, and in the law of contracts the theory is that the party injured by breach should receive as nearly as possible the equivalent of the benefits of performance. [Citations.]" [10 Cal.App.4th 1504] (1 Witkin, Summary of Cal.Law (9th ed. 1987) Contracts, § 813, pp. 732-733.)

In the instant case, the jury was instructed that the measure of damages was, as stated in Civil Code section 3300, "the amount which will compensate the plaintiff for all of the detriment proximately caused by the breach or which in the ordinary course of things would be likely to result therefrom." The jury was specifically instructed to consider: lost salary and benefits from the date of discharge to the date of the verdict, less earnings in the same period; losses from the date of trial into the future if the...