Mitchell v. American Sav. and Loan Ass'n
| Decision Date | 13 March 1979 |
| Docket Number | No. 2,CA-CIV,2 |
| Citation | 122 Ariz. 138,593 P.2d 692 |
| Parties | Paul O. MITCHELL and Marlene M. Mitchell, husband and wife, Plaintiffs-Appellees, v. AMERICAN SAVINGS AND LOAN ASSOCIATION, a corporation, Defendant-Appellant. Paul O. MITCHELL and Marlene M. Mitchell, husband and wife, Plaintiffs-Appellants, v. AMERICAN SAVINGS AND LOAN ASSOCIATION, a corporation, Defendant-Appellee. 3022. |
| Court | Arizona Court of Appeals |
These are consolidated appeals arising out of the termination of plaintiff Paul Mitchell's employment by American Savings and Loan Association and the latter's commencement of an action to foreclose Mitchell's mortgage. American Savings appeals from a $7,500 judgment on a jury verdict in favor of Mitchell for breach of a contract for severance pay, contending the agreement is unenforceable as a matter of law either because it is void as against public policy, or for lack or failure of consideration. Mitchell appeals from the dismissal of his claim for wrongful commencement of the foreclosure action during the pendency of the dispute over severance pay. We find no error in either instance.
Mitchell was employed in 1971 as executive vice-president and managing officer of American Savings. His employment was terminable at the will of either party. Sometime early in 1975 he became a member of the American Savings board of directors. On October 3, 1975, a special meeting of the board was called for the purpose of terminating his employment. After some discussion, the following resolution was adopted:
RESOLVED that the resignation of Paul O. Mitchell as Vice President, Managing Officer and Director of this association is hereby accepted, effective immediately; and in consideration of said resignation the association shall pay Paul O. Mitchell severance pay of six months at the rate of $1,875 per month, less the usual and customary deductions, from October 3, 1975; and that Paul O. Mitchell shall not be entitled to any benefits from the association as an Officer, Director and Employee after October 3, 1975; and the payment of said severance pay is subject to no adverse conduct on the part of Paul O. Mitchell, detrimental to the association and the orderly transition of the management of the association; and subject to Paul O. Mitchell's cooperation in the transition in the management of the association up to and including October 15, 1975.
In accordance with the resolution, Mitchell participated in the management transition through October 15 and received semi-monthly payments through December 15. On December 23, however, with $7,500 still payable under the terms of the earlier resolution, the American Savings board as then constituted adopted the following resolution:
RESOLVED, that the Association terminate Paul Mitchell's severance pay, effective immediately, on the grounds that his adverse conduct has been detrimental to the Association.
American Savings made no further payments to Mitchell and in April of 1976 commenced an action to foreclose a mortgage that he and his wife had executed. The Mitchells in their answer denied that the mortgage note was in default and by counterclaim sought damages for breach of the contract for severance pay and wrongful commencement of the foreclosure action. Prior to trial the foreclosure complaint was dismissed on stipulation and the claim for wrongful foreclosure was dismissed on motion of American Savings. The claim for breach of the severance pay agreement proceeded to trial with the Mitchells as plaintiffs and American Savings as defendant.
For the first time on appeal American Savings argues that Mitchell's claim for severance pay is unenforceable because an agreement by a corporate officer or director to resign his office for a pecuniary benefit to himself is void as against public policy. This court in Nutter v. Bechtel, 6 Ariz.App 501, 433 P.2d 993 (1967), has held that the illegality of a contract may be raised for the first time on appeal by the court on its own initiative. If the court can do this, presumably so can the parties. The authorities cited by American Savings, however, do not support the application of the...
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