Reid v. Overland Machined Products

• Decision Date: 27 January 1961
• Citation: Reid v. Overland Machined Products, 10 Cal.Rptr. 819, 55 Cal.2d 203, 359 P.2d 251 (Cal. 1961)
• Parties: , 359 P.2d 251 James S. REID, Respondent, v. OVERLAND MACHINED PRODUCTS (a Corporation), et al., Appellants. L. A. 26046.
• Court: California Supreme Court

Page 819

10 Cal.Rptr. 819

55 Cal.2d 203, 359 P.2d 251

James S. REID, Respondent, v.OVERLAND MACHINED PRODUCTS (a Corporation), et al., Appellants.

L. A. 26046.

Supreme Court of California, In Bank.

Jan. 27, 1961.

George C. Black, Culver City, and Patrick Kerrigan, Beverly Hills, for appellants.

John F. Bremer, Los Angeles, for respondent.

Pauline Nightingale, Effie Sparling, William P Nutter, Los Angeles, and Milford A. Maron, as amici curiae on behalf of respondent.

TRAYNOR, Justice.

Plaintiff was employed by Overland Machined Products Company on February 25, 1952 as its exclusive sales representative.In this action he seeks an accounting for wages and commissions allegedly earned pursuant to a written contract of employment.

The contract provides: 'For his services rendered herein and for faithful performance thereof, second party shall receive a commission of five per cent, (5%) of the entire gross business done by first party subsequent to 25th day of February, 1952.

'It is distinctly understood and agreed that second party shall only be entitled to receive any commission or any other sums of money herein specified on such new business contracts or purchase orders as may be obtained or received by first party subsequent to 25th day of February, 1952, and only then so long as this agreement remains in full force and effect.'

The contract guarantees plaintiff certain monthly amounts, and provides that whenever the commission exceeds the guaranteed amounts the balance of the commission 'shall be paid * * * if as and when the accounts receivable * * * are paid.'The monthly guarantees were paid when due and are not in dispute.Each party is given the power to terminate the contract on 30 days' notice.

The contract was terminated effective November 27, 1953.On February 15, 1954, plaintiff demanded the payments of commissions owed to him and a closing of his account.Defendant sent plaintiff a check for $792.14 bearing an endorsement that the payment was 'payment in full for all commissions due' under the contract.Plaintiff returned the check objecting to the endorsement.

Thereafter an accountant employed by plaintiff to examine defendant's books advised defendant that the previous offer of payment was short $15.Defendant then sent plaintiff the original check for $792.14 and another check for $15.The letter accompanying the two checks stated that the payment was made in full payment of all commissions due under the contract.Plaintiff cashed the $15 check, which did not have a restrictive endorsement, and retained and lost the check for $792.14.There was no further communication between the parties until plaintiff filed this action.

The parties stitulated that defendant owes commissions of $792.14 on orders invoiced to the time of the termination of employment, and the defendant has paid this amount into court.Although the parties disagree on defendant's liability for commissions on orders obtained before the termination of employment but invoiced after such termination, the amount of these orders was stipulated to at the trial.The effect of these stipulations is that 5% of such orders is $10,694 ¹ if all the orders are considered or $4,948.95 if the orders that were changed after their original solicitation are deleted.The latter orders were referred to by the parties as 'change orders.'

The trial court awarded plaintiff commissions on all of the disputed orders.Defendant challenges this judgment on three grounds: (1)the court erred in its conclusion of law that the evidence failed to establish an accord and satisfaction; (2)the court relied on incompetent evidence in determining that plaintiff is entitled to commissions on the 'change orders,' and (3)the court erroneously excluded extrinsic evidence offered to prove that the parties intended that commissions should be paid only on orders invoiced during the employment.

The trial court correctly ruled that there was no accord and satisfaction.Either all or at least $792.14 of the amount of defendant's offer to plaintiff was for wages concededly owed to him.Ordinarily the conditional payment of either an amount concededly owed or an amount in excess of that concededly owed is sufficient consideration for a settlement of a bona fide disputed claim.(Potter v. Pacific Coast Lumber Co., 37 Cal.2d 592, 602, 234 P.2d 16;seeCorbin on Contracts, Vol. 6, § 1289, p. 128) and an offer and acceptance of such an amount given in full payment for the disputed claim therefore discharges the debt.

Labor Code section 206, however, places wage claims in a separate category.That section provides: 'In case of a dispute over wages, the employer shall pay, without condition and within the time set by this article, all wages, or part thereof, conceded by him to be due, leaving to the employee all remedies he might otherwise be entitled to on any balance claimed.'(Italics added.)Hence in a dispute over wages the employer may not withhold wages concededly due to coerce settlement of the disputed balance.An employer and employee may of course compromise a bona fide dispute over wages but such a compromise is binding only if it is made after the wages concededly due have been unconditionally paid.

Defendants invoke Sayre v. Western Bowl, 76 Cal.App.2d 793, 799, 174 P.2d 466, for the proposition that section 206 of the Labor Code does not apply to conditional tenders of commissions or bonuses.That case involved the collection of penalty wages and not an accord and satisfaction.Any implication therein that commissions are different from other wages is inconsistent with Labor Code section 200, subdivision (a)² and is disapproved.

Defendant's contention that Labor Code section 206 merely provides a statutory remedy for its breach but does not invalidate an accord and satisfaction entered into in violation of the statute is without merit.Section 206 is designed to secure to the wage earner prompt payment of all wages concededly due and it expressly precludes an employer's coercing a settlement of disputed claims by offering conditional payment.'Where a statute prohibits or attaches a penalty to the doing of an act, the act is void even though the statute does not expressly pronounce it so * * *.The imposition by the statute of a penalty implies a prohibition of the act referred to and a contract founded upon such an act is void.'Stonehocker v. Cassano, 154 Cal.App.2d 732, 736, 316 P.2d 717, 720;accord: Smith v. Bach, 183 Cal. 259, 262, 191 P. 14.

It has long been settled that a claim will not be discharged when the purported accord and satisfaction violates state law.In Sierra & San Francisco Power Co. v. Universal Electric & Gas Co., 197 Cal. 376, 387, 241 P. 76, 80, we refused to discharged a claim because the alleged accord and satisfaction would have resulted in utility payments contrary to the law, stating that: 'The discharge of claims by way of accord and satisfaction is dependent upon contract express or implied; and it follows that the essentials necessary to a valid contract generally must be present in a contract of accord and satisfaction.'

The two checks were mailed to plaintiff as a single conditional payment in satisfaction of...