Obey v. McFadden Corp.

• Decision Date: 07 January 1985
• Docket Number: Docket No. 72340
• Citation: 360 N.W.2d 292,138 Mich.App. 767
• Parties: Joseph OBEY, Plaintiff-Appellee, v. McFADDEN CORPORATION, a Michigan corporation, Defendant-Appellant. 138 Mich.App. 767, 360 N.W.2d 292
• Court: Court of Appeal of Michigan — District of US

Page 292

360 N.W.2d 292

Joseph OBEY, Plaintiff-Appellee, v. McFADDEN CORPORATION, a Michigan corporation Defendant-Appellant.

Docket No. 72340.

138 Mich.App. 767, 360 N.W.2d 292

Court of Appeals of Michigan.

Submitted April 18, 1984.

Decided Nov. 7, 1984.

Released for Publication Jan. 7, 1985.

[138 MICHAPP 769] Sharon S. Friedman, Southfield, for plaintiff-appellee.

McGinty, Brown, Jakubiak, Frankland & Hitch, P.C. by Vittoria E. Porco, East Lansing, for defendant-appellant.

[138 MICHAPP 770] Before HOLBROOK, P.J., and CYNAR and GILLESPIE, ^* JJ.

PER CURIAM.

Plaintiff filed a complaint against defendant alleging breach of employment contract. After a trial in Oakland County Circuit Court a jury returned a verdict in favor of plaintiff and awarded $35,000 in damages. Defendant brought a motion for judgment notwithstanding the verdict and for a new trial. The motions were denied. Defendant appeals to this Court as of right.

Plaintiff was employed by defendant as a salesman. Plaintiff's territory included the Caro School District, and he made a number of sales to the district through its Superintendent James Sutherland. Over a period of ten years, Sutherland approached plaintiff four times for personal favors. Sutherland said he had equipment he wanted to sell to the school district but he feared a direct sale. Purchase orders were drawn to Obey & Associates (a business plaintiff had once operated). Obey & Associates then invoiced the school district, checks were issued to Obey & Associates and cashed. The proceeds were given to Sutherland who had presumably delivered the equipment to the school district.

In May 1978, information came to light indicating a possible criminal conspiracy, involving Sutherland, to defraud the school district of thousands of dollars. Through the above scheme and other transactions Sutherland apparently bilked the school district out of between $60,000 and $100,000 over a ten-year period.

A general investigation of Sutherland revealed the Obey transactions. Defendant McFadden Corporation suspended plaintiff in May, 1978, pending an investigation and to give plaintiff a chance to [138 MICHAPP 771] clear himself. In the letter suspending plaintiff defendant stated:

"The Board of Directors reluctantly took action this afternoon to suspend you immediately. This suspension will remain in effect until such time as the matter involving the account of Caro Community Schools and James Sutherland finds you clear of any responsible acts either willingly or knowingly.

"This does not affect any commissions you have earned to this date."

Plaintiff was never indicted, but was granted immunity in return for testifying against Sutherland. In March, 1979, after being suspended for almost eleven months, plaintiff was discharged by defendant. Plaintiff brought suit against defendant alleging, in pertinent part, breach of the employment contract between the parties and breach of an implied agreement which was created by the suspension letter.

Howard Messenger, owner and president of McFadden Corporation, testified that the company's employee policy manual was the corporation's "pledge" to its personnel. The "pledge" included statements that (1) employees would be treated with consideration and respect, (2) discharge would be avoided except as a last resort, (3) the company would maintain an open door policy in regards to employee problems and suggestions, and (4) employees would be informed of developments in the business which may affect them.

Messenger further testified that on May 9, 1978, plaintiff met with Messenger, Jan Squires (an administrative assistant at McFadden) and Michigan State Police Sergeant Sunday. During the meeting Messenger learned of a December 1, 1977, transaction for $1,382 between Obey and Sutherland along the lines described above. A second [138 MICHAPP 772] meeting later that day revealed two other transactions. Plaintiff told Messenger and Sunday that he did not make any money on the transactions but admitted that he had made an error in judgment.

The board of directors took action on the matter. Messenger reported the three transactions to the board and added that plaintiff had claimed to have made no money. Plaintiff was given the letter of suspension on May 9, 1978. No other terms of the suspension were discussed.

During the suspension period plaintiff's lawyer contacted defendant and defendant's lawyers were, in turn, in contact with plaintiff's lawyer. Direct contact between plaintiff and defendant was minimal. At the time the suspension began defendant was 60 years old and expected to retire at age 62.

In July, 1978, the board passed a resolution to discharge plaintiff. However, defendant's counsel advised the board that to discharge plaintiff at that time would be premature and any final decision to discharge plaintiff should await more complete facts from the office of the Michigan Attorney General. Plaintiff's attorney sent defendant a letter requesting a review of plaintiff's situation and an end of the suspension. The letter was forwarded to defendant's counsel for review and reply.

In October, 1978, a fourth transaction, which occurred in April, 1976, was disclosed to defendant through a transcript of a statement by plaintiff to the Attorney General.

Plaintiff testified that he expected his suspension would be short. Plaintiff said he understood that "cleared" meant "criminal clearance". He did not look for another job because he did not expect to be discharged.

Plaintiff was discharged by a letter dated March 27, 1979, which stated:

[138 MICHAPP 773] "The Board of Directors of McFadden Corporation, at their last Regular Meeting, having thoroughly reviewed your activities and involvement with James Sutherland, Superintendent, Caro Community Schools, has concluded your activities and conduct were contrary to the faithful and diligent performance of your responsibilities on behalf of McFadden Corporation, and therefore, feel that reinstatement cannot be justified with termination of employment becoming effective immediately."

Plaintiff received his pension benefits and outstanding commissions.

After the close of his proofs, plaintiff's counsel moved to amend the complaint to conform with the evidence under GCR 1963, 118.3, claiming a breach of the contract created by the suspension notice. The amendment was allowed over the objection of defense counsel.

Defendant moved for a directed verdict claiming that plaintiff had not shown an enforceable employment contract. The trial court reserved its ruling. Defendant recalled Messenger. He testified about the activities by defendant's board regarding plaintiff. He said that, at the time of the June 22, 1978, board meeting, defendant did not have the complete story regarding plaintiff. His situation was discussed at the July board meeting after receipt of the letter from plaintiff's attorney, and at a special meeting on August 2, 1978, at which the board discussed legal counsel's recommendation that plaintiff not be discharged at that time. Counsel had suggested that no disposition should be made until prosecution of Sutherland had been completed. At the regular August meeting the board was informed that there were no new developments in plaintiff's situation. At the September meeting the board was informed that the criminal action against Sutherland was continuing and that [138 MICHAPP 774] plaintiff had not testified at the preliminary examination.

No board meeting was held in October, 1978. During that month defendant received information about the fourth transaction between plaintiff and Sutherland which had occurred in April, 1976. At the November meeting additional documents pertaining to the criminal case against Sutherland were given to the board for it to review. The board decided to resolve plaintiff's status at the next board meeting.

At the December 15, 1978, meeting the board was informed that Sutherland was to be sentenced December 18, 1978. For this reason the matter was held in abeyance until January, 1979. At the January 18, 1979, meeting the board voted to discharge plaintiff.

A proposed termination letter was offered to the board. The initial draft did not meet with the board's approval. A subsequent draft by defendant's counsel was approved and mailed to plaintiff in March, 1979.

Sergeant Sunday testified that plaintiff was never told that he was cleared of any criminal activity. Rebecca McClear, a former assistant attorney general, said plaintiff was not cleared of criminal charges but was given immunity from prosecution.

Defendant renewed its motion for a directed verdict at the close of proofs. The court reserved its ruling. Defendant insisted on a theory instruction and the parties agreed on a general verdict. The jury returned a verdict for plaintiff.

As a preliminary observation, we note that much of the confusion in this case can be attributed to the ambiguities in plaintiff's theories. The plaintiff's theories were subject to frequent change as the trial progressed towards closing argument. [138 MICHAPP 775] In opening statement plaintiff's counsel stated to the jury that the plaintiff would show wrongful discharge and breach of contract. The jury was told that it would be shown that defendant breached the contract created by its written agreement with plaintiff which was supplemented by defendant's policy manual. Furthermore, plaintiff's counsel stated that defendant breached the obligation to plaintiff that was created by the suspension letter. Plaintiff's counsel stated:

"We're alleging three basic wrongs that were done by the Defendant Corporation to the Plaintiff. The first is a wrongful discharge. The second is a breach of contract and the third is an interference with advantageous economic relationships."

Plaintiff's counsel continued:

"Now, the evidence is going to show that the parties had initially entered into a written contract way back when...