Ryan v. Upchurch

• Decision Date: 23 August 1979
• Docket Number: No. IP 78-218-C.,IP 78-218-C.
• Parties: Marjorie J. RYAN v. Cynthia UPCHURCH, Sue Souders, Edward Sims, Charles B. Farr, Kenneth S. Axelson, J. C. Penney Company, Inc.
• Court: U.S. District Court — Southern District of Indiana

474 F. Supp. 211

Marjorie J. RYAN v. Cynthia UPCHURCH, Sue Souders, Edward Sims, Charles B. Farr, Kenneth S. Axelson, J. C. Penney Company, Inc.

No. IP 78-218-C.

United States District Court, S. D. Indiana, Indianapolis Division.

July 5, 1979.

As Amended August 23, 1979.

Dennis D. Carroll of Blevins, Carroll & Shrock, Anderson, Ind., for plaintiff.

John W. Purcell and Michael R. Maine of Baker & Daniels, Indianapolis, Ind., for defendants.

ORDER

STECKLER, Chief Judge.

This matter is before the Court on defendants' motion to dismiss, or in the alternative for summary judgment. Fed.R. Civ.P. 12(b)(6), 56. The Federal Rules state that if a court considers matters outside the pleadings in ruling on a 12(b)(6) motion, then the motion should be considered as one for summary judgment pursuant to Rule 56. Fed.R.Civ.P. 12(b). Therefore, this motion will be considered as one for summary judgment.

Plaintiff, in her complaint originally filed in state court, alleges that she was employed by defendant J. C. Penney Company, Inc. on March 3, 1971 and discharged on June 3, 1977. She avers that her employment was terminated in violation of her rights, contractual and otherwise, resulting in substantial damages. This action was subsequently removed to this Court pursuant to 28 U.S.C. § 1441 (1976).

In addition to J. C. Penney Company, Inc., plaintiff sued defendants Cynthia Upchurch, Sue Souders, Edward Sims, Charles B. Farr, and Kenneth S. Axelson. All of these individual defendants are employees of J. C. Penney.

The general rule is that agents, if they are acting within their authority, are not personally liable for the breach of a contract entered into by them, in their role as an agent for a disclosed principal; such a contract only binds the principal. See Thompson Farms v. Corno Feed Prods., Ind. App., 366 N.E.2d 3, 12 (1977); see also Restatement (Second) of Agency §§ 320, 328 (1958).

In the case at bar, it is clear that J. C. Penney, as employer, was known to be the principal, and all allegations of the existence of a contract directly concern J. C. Penney. Likewise, the allegations in paragraph two of the complaint made against these five individual defendants specify that they are "supervisors, officers and agents of the defendant, J. C. Penney Co., Inc." Plaintiff makes no allegation that the individually named defendants were acting outside the scope of their employment. Indeed, the complaint does not specify any acts of the individual defendants which contributed to the alleged harm. The result is that these five individuals should be considered agents acting for a disclosed principal.

Fed.R.Civ.P. 56(e) states:

"When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him."

Plaintiff has made two responses to this motion for summary judgment. See Plaintiff's Reply in Opposition to Defendants' Motion, filed June 5, 1978, and Plaintiff's Supplemental Affidavit and Memorandum in Opposition to Defendants' Motion, filed July 25, 1978. In neither response did plaintiff allege any "specific facts showing that there is a genuine issue for trial" concerning these five individual defendants. Accordingly, summary judgment should appropriately be entered for them.

The next question concerns the liability of defendant J. C. Penney. Fed.R. Civ.P. 56(c) states that summary judgment should be rendered if the record indicates that there is no genuine issue as to any material fact. The party opposing the motion is to be given the benefit of all reasonable doubts and inferences in determining whether a genuine issue exists that justifies proceeding to trial. Adickes v. S. H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962); 10 C. Wright & A. Miller, Federal Practice and Procedure § 2725, at 510 (1973). It is clear that a party moving for summary judgment is not entitled to judgment merely because the facts he offers appear more plausible. 10 C. Wright & A. Miller, Federal Practice and Procedure § 2725, at 514 (1973).

Plaintiff, in her affidavit filed June 5, 1978, and supplemental affidavit filed July 25, 1978, alleges the following facts. She accepted J. C. Penney's employment offer in March 1971, because, among other things, the Company promised her that she would not be discharged except for just cause. This offer was made by Mrs. Adams, personnel manager at the Anderson, Indiana, store. Subsequent to her acceptance of the job, she was induced to remain with the Company and to commence participation in the firm's profit-sharing and pension plan by both Mrs. Adams and Mr. Eric Nance, her department manager, who assured plaintiff that she would not be discharged without cause. Plaintiff participated in the profit-sharing and retirement program in reliance upon those assurances that she would not be discharged without cause. Although she was later discharged, she had always complied with the Company's rules and J. C. Penney had no cause to fire her.

Defendant never submitted the affidavits of either Mrs. Adams or Mr. Nance controverting these averments, although other affidavits for the defendant were filed with the Court. Of course, whether Adams or Nance dispute plaintiff's averments is irrelevant for ruling on the pending motion.

The Rules of Decision Act, 28 U.S.C. § 1652 (1976) states that "the laws of the several states, except where the Constitution or treaties of the United States or acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply." In this case, Indiana law must be applied. See Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

Defendant J. C. Penney argues that plaintiff's employment relationship with it was terminable at will. It seems uncontroverted that plaintiff was not covered by a collective bargaining agreement, and defendant further asserts that there was no employment contract.

Whether there is a genuine issue concerning the existence of an employment contract¹ seems to be the critical inquiry. Defendant cites in support Pearson v. Youngstown Sheet & Tube Co., 332 F.2d 439 (7th Cir. 1964), which construes Indiana law.

In Pearson, plaintiff sued his employer for breach of an implied contract of permanent employment. That, of course, is not the situation at bar. Here plaintiff is alleging that J. C. Penney, acting through its agents, expressly promised, as a term of the employment contract, that plaintiff would not be dismissed without cause.

Defendant's position is that even if that promise was made, it did not become part of an enforceable contract. This is because of the doctrine of "mutuality of obligation." In an employment contract like the one at bar, plaintiff was not bound; she could leave her position at her will. The mutuality doctrine then mandates that because the employee is not bound, the employer is not bound, even if it makes representations to the contrary.

The "mutuality" doctrine in contract law has been repeatedly confused by the courts. See 1 Williston on Contracts § 105A, at 422 (1957); G. Grismore, Principles of the Law of Contracts § 68, at 111 (J. Murray rev. ed. 1965). This is, in part, because there are at least three discrete mutuality concepts: (1) mutuality of assent; (2) mutuality of remedy; and (3) mutuality of obligation. See 1 Williston on Contracts § 105A, at 422 (1957); see also 1A Corbin on Contracts § 152, at 3 (1963) (Corbin lists a fourth category entitled mutuality of consideration). Unfortunately, many previous cases have not kept the doctrines separate, and by comingling their elements have distorted their purpose and meaning.

Confusion has resulted most frequently where one party is given an option, not accorded to the other, of discontinuing performance or of cancelling the contract. If the option goes so far as to render illusory the promise of the party given the option, there is indeed no sufficient consideration, and therefore no contract, but the mere fact that the option prevents the mutual promises from being coextensive does not prevent both promises from being binding according to their respective terms. 1 Williston on Contracts § 105A, at 424-25 (1957).

In Shaw v. S.S. Kresge Co., Ind.App., 328 N.E.2d 775 (1975), the plaintiff-employee lost his breach of contract action against his employer. Plaintiff alleged he was discharged in violation of a company handbook which governed employment conditions. The Court noted:

"Even assuming, arguendo, that the handbook relied upon by appellant constituted a part of the contract, in the absence of a promise on the part of the employer that the employment should continue for a period of time that is either definite or capable of determination, the employment relationship is terminable at the will of the employer. See: Pearson v. Youngstown Sheet and Tube Co. (7th Cir., 1964), 332 F.2d 439. There being no binding promise on the part of the employee that he would continue in the employment, it must also be regarded as terminable at his discretion as well. For want of mutuality of obligation or consideration, such a contract would be unenforcible in respect of that which remains executory. See: 1A Corbin, Contracts, § 152 (1963). See also 1 Corbin, Contracts, § 96 (1963); 3A Corbin, Contracts § 683 (1960)."

328 N.E.2d at 779.

If this case was the definitive Indiana decision in this area, the Court would be compelled to grant summary judgment to J. C. Penney. The Shaw court embraced the concept of mutuality of...