Spooner v. Reserve Life Ins. Co.
| Decision Date | 15 September 1955 |
| Docket Number | No. 33255,33255 |
| Citation | 287 P.2d 735,47 Wn.2d 454 |
| Court | Washington Supreme Court |
| Parties | Robert W. SPOONER and Laurine Anderson, Respondents, v. RESERVE LIFE INSURANCE COMPANY, a corporation, Appellant. |
Bogle, Bogle & Gates, Seattle, for appellant.
Karr, Tuttle & Campbell, Carl G. Koch, Coleman P. Hall, Seattle, for respondents.
This appeal is from a judgment in favor of the plaintiff-respondents for the amount of bonuses to which they claim they are entitled for the period from February 29, 1952, through February 28, 1953. The respondents were, during that time, agents of the appellant insurance company.
The following bulletin was issued by the appellant on February 29, 1952, to the respondents and other agents. (The italicized portions herein appear as underscored words in the bulletin as issued.)
Extra Earnings Agreement
'Your Company has grown in size--premium wise--in the industry from 421st place to 4th of its kind in five short years.
'That all-time record, we believe, speaks for itself. But what does it mean to You?
'It means that you offer a 'preferred' product. Because of the values your product provides, and because of the promotional effort behind it, people tend to select your Company.
'Your Home Office folks are well aware, however, that you in the field must enjoy a sense of real security and see the road of the future stretching clearly ahead. Our association must be mutually profitable and pleasant. We hope to make your job more interesting and that you will earn more money than you could anywhere else.
'Now, in addition to present substantial commissions, we are announcing your Renewal Bonus Plan which provides extra earnings. This has been a long time in the making. It is, we believe, superior to anything of its kind ever introduced.
'Reserve wants career men--men who are as much concerned about next year as next month. To attract such workers, and inspire their best efforts, your Company now puts into effect a schedule of Bonus Payments.
'Your Renewal Bonus earnings will depend upon the Quality of your business as well as the amount. If you do a good job, you will earn a substantial income. If you do an outstanding job, you will be very handsomely rewarded.
'You will receive at the end of each 12 month period, a bonus in accordance with the following schedule:
"If Your Lapse You Will Of Your Average Premiums In
Ratio Is 0 to 10% Receive 150% Monthly Force
" 10 to 20% " 125% " "
" 20 to 30% " 100% " "
" 30 to 40% " 80% " "
" 40 to 50% " 60% " "
" 50 to 60% " 50% " "
" 60 to 70% " 40% " "
" over 70% " none " "
'This renewal bonus is a voluntary contribution on the part of the Company. It is agreed by you and by us that it may be withheld, increased, decreased or discontinued, individually or collectively, with or without notice. Further, this Renewal Bonus is contingent upon you actually writing business for this Company as a licensed agent at the time such Bonus is paid.
'It will be paid once a year--on the mean amount of your business in force. This annual method of payment cuts down the cost of keeping records. Also--and most important--during the year the boys are separated from the men. The boys will get no bonus. That Leaves More For The Men.
'In return, I ask only that you give me your best efforts. That means that you will sell your business cleanly and strictly on the merits of the policy itself and follow the letter and spirit of the Company's rules and practices.
'Twelve months from now the Accounting Department will get busy and tote up the amount of business you have in force which is produced by you from the date of this agreement. They must get out the lapses and put the reinstatements back in. All that takes time. But your first Renewal Bonus check will be sent to you as quickly as humanly possible after the 12 months is up.
'If you welcome these Extra Earnings, and I know you will, and to avoid any possible future misunderstanding, sign the enclosed copy of this agreement and hand it to your Manager who will sent it to me.
'Remember: Nothing succeeds like Success!
________
Signature of Staff Member'
If this bulletin was a promise to pay a bonus under certain conditions, it must be found that the respondents met those conditions by remaining with the appellant and selling insurance, maintaining a lapse ratio of twenty to thirty per cent. The pivotal question here is whether this bulletin contains an enforcible promise of a bonus if its conditions are met or, by reason of the following paragraph, presents only an illusion of a promise:
(Italics ours.)
We are not here concerned with a conventional bonus case such as Scott v. J. F. Duthie & Co., 1923, 125 Wash. 470, 216 P. 853, 28 A.L.R. 328. In that case it was held that the offer and the performance of the conditions of the offer constituted an enforcible contract, the employer having procured, in addition to the faithful and efficient service to which he was entitled under the employment of the employee for an indefinite term of service, continuity of service for the period designated in his offer. Extensive annotations covering bonus cases of this character are found in 28 A.L.R. 331, 346.
Nor are we here concerned with the rarer but still enforcible bonus cases in which there is a purely gratuitous promise by the employer which induces action of a definite and substantial character on the part of the employee. The applicable rule in such cases is well stated in 1 Restatement, Contracts 110, § 90, which reads as follows:
'A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.'
We recognized and discussed this rule in Luther v. National Bank of Commerce, 1940, 2 Wash.2d 470, 98 P.2d 667; Hazlett v. First Fed. Sav. & Loan Ass'n, 1942, 14 Wash.2d 124, 127 P.2d 273; State v. Northwest Magnesite Co. 1947, 28 Wash.2d 1, 182 P.2d 643; Hill v. Corbett, 1949, 33 Wash.2d 219, 204 P.2d 845. For application or discussion in employer-employee cases, see Hunter v. Sparling, 1948, 87 Cal.App.2d 711, 197 P.2d 807; West v. Hunt Foods, Inc., 1951, 101 Cal.App.2d 597, 225 P.2d 978; Hughes v. Encyclopaedia Britannica, 1954, 1 Ill.App.2d 514, 117 N.E.2d 880, 42 A.L.R.2d 456; Langer v. Superior Steel Corp., 1932, 105 Pa.Super. 579, 161 A. 571.
But before this rule can be applied, there must be a real promise to be enforced. Action in reliance upon a supposed promise creates no obligation on an individual or corporation whose only promise is wholly illusory. 1 Corbin on Contracts 658, § 201. Appellant insists that no enforcible promise to pay a bonus is contained in the bulletin. Our problem, as we have heretofore indicated, is whether the paragraph referred to, and particularly the portion reserving a right to decrease or withhold the bonus, makes an illusory promise of what would otherwise be an enforcible one.
A supposed promise may be illusory because it is so indefinite that it cannot be enforced, Ford Motor Co. v. Kirkmyer Motor Co., 4 Cir., 1933, 65 F.2d 1001, or by reason of provisions contained in the promise which in effect make its performance optional or entirely discretionary on the part of the promisor. Fontius Shoe Co. v. Lamberton, 1925, 78 Colo. 250, 241 P. 542; Fickling v. Pollard, 1935, 51 Ga.App. 54, 179 S.E. 582; Hughes v. Encyclopaedia Britannica, supra...
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...Promissory estoppel as defined by section 90 of the Restatement of Contracts is accepted in Washington law. Spooner v. Reserve Life Ins. Co., 47 Wash.2d 454, 287 P.2d 735 (1955). When a promisee has relied to his detriment upon a promise which the promisor should have foreseen would be reli......
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