Valentine v. General American Credit, Inc.

• Decision Date: 06 May 1983
• Docket Number: Docket No. 61900
• Citation: 123 Mich.App. 521,332 N.W.2d 591
• Parties: Sharon VALENTINE, Plaintiff-Appellant, v. GENERAL AMERICAN CREDIT, INC., Defendant-Appellee. 123 Mich.App. 521, 332 N.W.2d 591, 118 L.R.R.M. (BNA) 3329
• Court: Court of Appeal of Michigan — District of US

Page 591

332 N.W.2d 591

Sharon VALENTINE, Plaintiff-Appellant, v. GENERAL AMERICAN CREDIT, INC., Defendant-Appellee.

Docket No. 61900.

123 Mich.App. 521, 332 N.W.2d 591, 118 L.R.R.M. (BNA) 3329

Court of Appeals of Michigan.

Submitted Nov. 2, 1982.

Decided Feb. 25, 1983.

Released for Publication May 6, 1983.

[123 MICHAPP 523] Keller, Katkowsky & Golden, P.C. by Joseph A. Golden, Southfield, for plaintiff-appellant.

Garan, Lucow, Miller, Seward, Cooper & Becker, P.C. by Milton Lucow (Gromek, Bendure & Thomas, Detroit, of Counsel), by Daniel J. Wright, Detroit, for defendant-appellee on appeal.

Before BRONSON, P.J., and V.J. BRENNAN and J.H. GILLIS, JJ.

PER CURIAM.

Plaintiff appeals the grant of summary judgment on two elements of her claim for damages.

Plaintiff sued defendant for damages for breach of an alleged implied employment contract. The trial court granted a summary judgment for defendant on that part of plaintiff's claim requesting punitive and exemplary damages for breach of contract. It also granted a summary judgment on plaintiff's second count, a claim for damages for intentional infliction of emotional distress. It held [123 MICHAPP 524] that Michigan law precludes the award of these types of damages sought for breach of an employment contract.

We are fortunate in that the principles of law to be applied here are clearly delineated in the Supreme Court's opinion in Kewin v. Massachusetts Mutual Life Ins. Co., 409 Mich. 401, 295 N.W.2d 50 (1980). Although that case involved damages arising out of nonpayment of insurance benefits under a disability income protection policy, we believe that the principles found to bar the relief sought in Kewin also bar the relief sought here.

In Kewin, the Court held that exemplary damages are normally not available for breach of a contract:

"Our review of the precedent [sic ] indicates that those cases which permit recovery of exemplary damages as an element of damages involve tortious conduct on the part of the defendant. See, e.g., McFadden v. Tate, 350 Mich 84; 85 NW2d 181 (1957) (assault and battery); Scripps v. Reilly, 38 Mich 10 (1878) (libel); Welch v. Ware, 32 Mich 77 (1875) (assault and battery). An award of exemplary damages is considered proper if it compensates a plaintiff for the "humiliation, sense of outrage, and indignity" resulting from injuries "maliciously, wilfully and wantonly" inflicted by the defendant. McFadden, supra, [350 Mich.] 89 . The theory of these cases is that the reprehensibility of the defendant's conduct both intensifies the injury and justifies the award of exemplary damages as compensation for the harm done the plaintiff's feelings.

"In cases involving only a breach of contract, however, the general rule is that exemplary damages are not recoverable. 9 Michigan Law & Practice, Damages, Sec. 91, p 88; 22 Am Jur 2d, Damages, Sec. 245, p 337. Just as with that denying damages for mental distress, the theory underlying the denial of exemplary damages in breach of contract cases is that the plaintiff is adequately compensated when damages are awarded by [123 MICHAPP 525] reference only to the terms of the contract." Kewin, supra, 409 Mich. pp. 419-420, 295 N.W.2d 50.

The Court held that, "absent allegation and proof of tortious conduct existing independent of the breach * * * exemplary damages may not be awarded in common-law actions brought for breach of a commercial contract". Kewin, supra, 409 Mich. pp. 420-421, 295 N.W.2d 50.

Plaintiff, having alleged no tortious conduct independent of the breach, cannot recover damages if her employment contract is a commercial contract. She claims, however, that an employment contract is not commercial, but is personal in nature, seeking the benefit of an exception to the general rule noted in Kewin, supra, p. 420, 295 N.W.2d 50. We cannot agree. The only contract which the Court in Kewin recognized as noncommercial was the contract to marry. We agree with plaintiff that the employment relation consists of significant personal, as well as commercial, elements. An employment contract does not, however, fail the only test for a commercial contract noted by the Court in Kewin: The susceptibility of accurate pecuniary estimation of damages. A breach of an employment contract may produce substantial easily ascertainable monetary damages. In this respect, it is not at all like a marriage contract. It is also unlike other contracts for which exemplary (or punitive) damages have been held proper in other jurisdictions. See 22 Am.Jur.2d, Damages, Sec. 245, p. 337. Although we will not hold that all employment contracts are commercial under Kewin, plaintiff has failed to state any facts to make her employment contract exceptional by its emphasis on personal, rather than commercial, goals. We hold that plaintiff's complaint does not state a [123 MICHAPP 526] claim upon which exemplary damages may be awarded.

The trial judge also held that damages for mental distress were not recoverable for breach of an employment contract. Again, we turn to the Supreme Court's opinion in Kewin for guidance. In all breach of contract actions, the damages recoverable are those that arise naturally from a breach, or that were within the parties' contemplation at the time of contracting. Hadley v. Baxendale, 9 Exch. 341, 156 Eng.Rep. 145 (1854). Generally, damages for mental distress cannot be recovered for breach of a contract. Kewin, supra, p. 415, 295 N.W.2d 50. The Supreme Court recognized the continuing validity of the exception stated in Stewart v. Rudner, 349 Mich. 459, 84 N.W.2d 816 (1957):

"The nature and object of the agreement justified the treatment accorded it in Stewart. A contract to perform a Caesarean section is not a commercial contract in which pecuniary interests are most important. Rather, such a contract involves 'rights we cherish, dignities we respect, emotions recognized by all as both sacred and personal'. Stewart, 469 . Where such interests are invaded by breach of a contract meant to secure their protection, mental distress is a particularly likely result. Flowing naturally from the breach, these injuries to the emotions are foreseeable and must be compensated despite the difficulty of monetary estimation." Kewin, supra, 409 Mich. p. 416, 295 N.W.2d 50.

While we agree with plaintiff that breach of an employment contract is more likely to cause injuries to the emotions than most breaches of contract, we agree with defendant that the employment contract's essence is commercial. Upon a breach, plaintiff can be adequately compensated by reference to the contract's terms. Kewin, supra, p. 417, 295 N.W.2d 50. See also 38 Am Jur 2d, Fright, Shock and [123 MICHAPP 527] Mental Disturbance, Sec. 35, p. 43. The same result we have reached on this issue was reached by a federal district court applying Michigan Law in Fisher v. General Telephone Co. of the Northwest Inc., 510 F.Supp. 347 (E.D.Mich.1980).

Plaintiff's complaint alleged no facts on which a court could find that, in making her specific employment contract, the parties contemplated that mental distress damages would be caused by its breach. Kewin, supra, 409 Mich. p. 419, 295 N.W.2d 50. Although plaintiff labeled part of her complaint as a tort action for intentional infliction of mental distress, she pled no facts in support of this claim beyond stating that defendant intentionally breached the contract. If Michigan recognizes a tort action for the intentional infliction of emotional distress (see Kewin, supra, p. 421, 295 N.W.2d 50), plaintiff's complaint fails to state such a claim.

Affirmed. Costs to appellee.

J.H. GILLIS, Judge (dissenting).

I respectfully dissent. Plaintiff commenced this action for breach of an alleged implied contract of employment. The trial court granted summary judgment in favor of defendant on that portion of plaintiff's claim requesting punitive and exemplary damages for breach of the employment contract. The court also granted summary judgment on plaintiff's claim for damages for intentional infliction of emotional distress. Plaintiff appeals as of right.

The issue is whether Michigan law authorizes the award of mental distress damages and exemplary damages for breach of an employment contract.

Mental Distress Damages

Under the rule of Hadley v. Baxendale, 9 Exch. [123 MICHAPP 528] 341, 156 Eng.Rep. 145 (1854), damages recoverable for breach of contract are those that arise naturally from the breach or those that were within the contemplation of the parties at the time the contract was made. Where the contract is commercial in nature, damages are limited to the monetary value of the contract had the breaching party fully performed under it; mental distress damages are not recoverable. Kewin v. Massachusetts Mutual Life Ins. Co., 409 Mich. 401, 414-415, 295 N.W.2d 50 (1980). Mental distress damages are recoverable for breach of contract, however, where the contract is not primarily commercial in nature but, rather, involves "rights we cherish, dignities we respect, emotions recognized by all as both sacred and personal". Stewart v. Rudner, 349 Mich. 459, 469, 84 N.W.2d 816 (1957).

In Stewart, the plaintiff alleged that the defendant doctor had breached a promise to deliver plaintiff's child by Caesarean section. Plaintiff alleged that her child was stillborn as a result of defendant's breach, and she sought mental distress damages. The Supreme Court held that such damages were recoverable, stating:

"It is true, in the ordinary commercial contract, damages are not recoverable for disappointment, even amounting to alleged anguish, because of breach. Such damages are, in the words of defendant's requested charge, 'too remote.' But these are contracts entered into for the accomplishment of a commercial purpose. Pecuniary interests are paramount. In such cases breach of contract may cause worry and anxiety varying in degree and kind from contract to contract, depending upon the urgencies...