Tuthill Corp., Fill-Rite Div. v. Wolfe

Decision Date12 July 1983
Docket NumberFILL-RITE,No. 3-1182A313,3-1182A313
Citation451 N.E.2d 72
PartiesTUTHILL CORPORATION,DIVISION, Appellant (Defendant Below), v. Norman L. WOLFE, Appellee (Plaintiff Below).
CourtIndiana Appellate Court

Edward L. Murphy, Jr., Grant F. Shipley, Livingston, Dildine, Haynie & Yoder, Fort Wayne, for appellant.

David A. Lundy, Lundy and Associates, Fort Wayne, for appellee.

HOFFMAN, Presiding Judge.

Norman Wolfe was employed as a purchasing agent for appellant Tuthill Corporation, Fill-Rite Division. As a key employee, Wolfe participated in an Incentive Compensation Plan (ICP) administered by the Corporation. Terms of the plan were embodied in a writing recorded in the corporate minute book.

Wolfe was never fully apprised of the written terms of the ICP but rather was informed of its terms orally by his supervisor, Bernard Kapp. Kapp told Wolfe that he would receive a year-end bonus in an amount equal to one quarter of one percent of profits in excess of a specified level. A bonus check would be drafted for each member of the plan near the close of the year once the profits were determined.

Wolfe participated in the plan for several years until December 19, 1979, when he announced he would be leaving the Corporation in two weeks to enter into competition against it. Once notified the president of the Corporation fired Wolfe and withheld his bonus check which had already been drafted. Wolfe brought suit against the company seeking payment of his year-end bonus. A verdict was returned in Wolfe's favor in the amount of $8,202 compensatory damages, the amount of his bonus, and $4,500 punitive damages. This appeal results.

The issues raised by appellant have been consolidated and restated below:

(1) whether the trial court erred in failing to grant appellant's motion for judgment on the evidence;

(2) whether the trial court erred in reading certain instructions to the jury which had been tendered by Wolfe;

(3) whether the trial court erred in refusing to read certain instructions tendered by appellant; and

(4) whether the trial court erred in awarding Wolfe punitive damages.

Appellant first argues the trial court erred in refusing to grant its motion for judgment on the evidence. Several theories are forwarded in support of this claim. The first of these theories involves a determination of the effect of the written ICP.

According to appellant the written ICP could have been accepted by Wolfe once he was notified of its existence even though he lacked knowledge of the exact terms. Appellant directs us to Alfaro et al. v. Stauffer Chemical Co. (1977), 173 Ind.App. 89, 362 N.E.2d 500, and Orton & Steinbrenner Co. v. Miltonberger (1920), 74 Ind.App. 462, 129 N.E. 47, which it contends support its position. However, these cases present factual situations unlike that which exists in the present case.

In Alfaro employees were not permitted to see or know of the existence of a severance pay plan administered by the company. When employees were laid off and attempted to enforce their rights under the severance pay plan, their claims were denied. The Court held the employees had no enforceable rights since they could not have accepted an offer and entered into a contract of which they had no knowledge.

Orton & Steinbrenner Co. presented a different situation. A new worker was informed of a bonus plan when he started work but had no notice of the entire terms of the bonus as they had been posted prior to his beginning employment. When the employee attempted to enforce his rights under the bonus plan, the Court found for him, determining he had accepted the offer even though he lacked knowledge of all the contract terms.

The present case involves a factual situation which falls between the gaps of these two decisions. Wolfe was told of the ICP as was the employee in Orton & Steinbrenner. However, as in the Alfaro case the specific terms of the ICP were hidden from Wolfe's knowledge. The written plan in the case at bar was recorded only in the corporate minute book which only shareholders and directors are entitled to see. Thus, unless Wolfe was a shareholder, he lacked the ability to see the terms of the ICP as did the employees of Stauffer Chemical Company in Alfaro.

Thus, in the case at bar Wolfe could not have entered into an agreement based on the written ICP since that written plan was hidden from him. Yet he is not prevented from entering into any bonus plan as there was an oral offer by his supervisor, unlike the situation in Alfaro. Therefore, if any ICP exists in this case, it must be based on the oral representations between Kapp and Wolfe as the written ICP never became an enforceable contract between the parties.

Appellant then switches course and argues that no enforceable contract exists upon which to base the jury's award of damages. In support of this contention appellant alleges there was no consideration to support a bonus contract. Two theories are forwarded by appellant in support of this allegation.

First, appellant claims that Wolfe failed to give his employer anything of benefit or suffer any detriment in return for the ICP. Col. Mtg. Co. of Ind. v. Windmiller (1978), 176 Ind.App. 535, 376 N.E.2d 529, cited by appellant, provides some most useful language for this decision where the court states: "The amount and terms for the bonus were sufficiently specific and clearly provision for bonus payments was in contemplation of services yet to be performed by Windmiller." (Emphasis added.) 176 Ind.App. at 538, 376 N.E.2d at 531. The consideration for the contract was the employee's future services. Likewise, in the case at bar Wolfe was offered inclusion in the ICP in the early part of the year, several years ago. His bonus would be based upon his performance from that point on into the future part of that year and future years.

The very purpose of the ICP was to motivate key employees to increase productivity which would increase corporate profits thereby insuring those key employees a higher salary based on those improved profits. The plan worked; the profits improved. Certainly the improved profits were a benefit to Wolfe's employer and therefore adequate consideration.

Appellant also contends there was no consideration for the reason that appellant failed to work a full year. In support of this proposition appellant places great reliance on Montgomery Ward & Co., Inc. v. Guignet (1942), 112 Ind.App. 661, 45 N.E.2d 337, which held a discharged employee had no right to his bonus since he had failed to complete a full year of employment. However, in Montgomery Ward, unlike the case at bar, the bonus plan specifically provided that a full year's employment was a prerequisite to receiving a bonus. As the written plan never became effective between the parties and no mention of a required length of service was mentioned in the oral presentation of the plan, no such service requirement will be read into the plan.

Further, at the time Wolfe was terminated the excess profits of the Corporation had already been verified and the bonuses computed. An ICP bonus check had been drafted payable to Wolfe and was then withdrawn. By the admission of the Corporation's president the required service had been performed at the time the check was drafted; thus Wolfe satisfied the service requirement and his bonus check was withdrawn for other illegitimate reasons.

Next appellant presents a similar argument wherein it alleges the ICP was a mere "gratuitous promise" by Wolfe's employer and therefore unenforceable. As support for this proposition appellant cites Spickelmier Industries v. Passander (1977), 172 Ind.App. 49, at 52-53, 359 N.E.2d 563, at 565, which states: " '... A promise to pay an employee a bonus at the end of the year is a mere gratuity and not enforceable where the employee is not shown to have done or foregone something which otherwise he was not obliged to do or forego[.]' "

Appellant's position on this issue is virtually identical to its stance on the issue wherein it contends that Wolfe gave no consideration for the bonus. However, in Spickelmeir the employee was promised his bonus at the end of the year after he had finished performing his obligations. The ICP at issue in this case became effective several years before this dispute over a particular bonus. Since the corporate profits increased for the year, it may be presumed that the ICP had the desired effect of motivating key employees to improve company profits. Wolfe had received excellent employment reviews up until his termination. Thus, Wolfe engaged in conduct, induced by this offer of a bonus, in addition to his normal employment services and was entitled to his bonus.

Finally, appellant contends there was some notion of employee loyalty as a prerequisite to the ICP bonus at year end. Since Wolfe was disloyal by allegedly stealing plans for a company pump design to be used in competition against appellant, he had forfeited his right to his bonus. This argument suffers several flaws.

Initially it is noted that appellant cites no authority in support of its position which results in a waiver of any issue in this regard. Ind.Rules of Procedure, Appellate Rule 8.3(A)(7).

Even had appellant preserved this error its argument is unavailing. The ICP written or otherwise makes no mention of employee loyalty. The purpose of the plan is to motivate key employees who are in positions which can most influence corporate profits to perform in a manner which improves those profits. In return those key employees are paid a proportionate share of the increased profits which presumably resulted from their performance. Thus while loyalty may implicitly enter into the scheme the bottom line of the plan is motivation which produces increased profits, and not loyalty.

Further, when Wolfe was terminated his ICP bonus check was withdrawn. As stated above according to the president of the company this bonus had already vested in...

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