Whiteco Industries, Inc. v. Kopani

• Decision Date: 05 November 1987
• Docket Number: No. 75A03-8603-CV-68,75A03-8603-CV-68
• Citation: 514 N.E.2d 840
• Parties: 2 IER Cases 1684 WHITECO INDUSTRIES, INCORPORATED d/b/a Holiday Star Theatre and Holiday Festival Theatre, and Wachim Corporation, d/b/a Holiday Star Theatre and Holiday Festival Theatre, Defendants-Appellants, v. Gvozden M. KOPANI, Dominic Missimi and Sandra L. Burge, Plaintiffs-Appellees.
• Court: Indiana Appellate Court

Page 840

514 N.E.2d 840

2 IER Cases 1684

WHITECO INDUSTRIES, INCORPORATED d/b/a Holiday Star Theatre

and Holiday Festival Theatre, and Wachim

Corporation, d/b/a Holiday Star Theatre and Holiday Festival Theatre, Defendants-Appellants, v. Gvozden M. KOPANI, Dominic Missimi and Sandra L. Burge,

Plaintiffs-Appellees.

No. 75A03-8603-CV-68.

Court of Appeals of Indiana,

Third District.

Nov. 5, 1987.

Fred M. Cuppy, Kathryn D. Schmidt, Thomas, Burke, Dyerly & Cuppy, Richard L. Mostak, Merrillville, for defendants-appellants.

William H. Tobin, Steven T. Parkman, David M. Hamacher, Saul I. Ruman & Associates, Hammond, for plaintiffs-appellees.

GARRARD, Presiding Judge.

This case involves how the Statute of Frauds applies to employment contracts which may not be performed within one year. ¹ See IC 32-2-1-1.

While there was dispute concerning the facts at trial, for purposes of Whiteco's appeal we consider them from the perspective favorable to the judgment. (Of course, on Kordos' cross-appeal from the judgment on the evidence entered against him, we will consider the evidence favorable to his claim.)

The essential facts may be simply stated. In 1979 Whiteco, as owner, employed Richard Kordos to serve as executive producer of the Holiday Star Theatre and of a companion operation to be known as the Festival Theatre. The Star Theatre planned to provide between 36 and 42 weeks of Las Vegas type entertainment each year. The Festival Theatre, which was intended as a means of more fully utilizing the facility, was to provide students' and children's productions, musicals and community classes.

As executive producer Kordos was, at least, clothed with the apparent authority to employ various staff people on behalf of Whiteco.

Shortly after he was employed Kordos telephoned Missimi in New York and subsequently hired him as an associate director for the Festival Theatre. Whiteco paid Missimi for a house hunting trip to Merrillville, and it paid his moving expenses.

After a trip to New York City, Kordos employed Kopani as a scenic designer and Burge as property mistress. Whiteco paid Kopani for a house hunting trip and for moving expenses. It does not appear that any moving expenses were paid for Burge.

Missimi, Kopani and Burge (sometimes hereinafter referred to collectively as "the employees") were each told by Kordos that the job was to be for an entire year, renewable thereafter.

The Star Theatre side of the operation opened in November, 1979 and the Festival side opened December 19th with a production of Scrooge. Attendance at Scrooge was very disappointing. The production lost over $200,000.

As a consequence of the losses on Scrooge Whiteco decided to terminate the Festival Theatre. Accordingly, on December 21 Kordos was advised of this decision and that the employees were to be terminated. He told the employees and each also received a letter from Whiteco's general manager terminating their services after December 31, 1979. Each was given two weeks' severance pay.

Kordos was asked to be available through January and was paid through January 31, 1980. He was then terminated.

Kordos and the other employees brought suit for damages for breach of their employment contracts. The trial court granted judgment on the evidence against Kordos at the conclusion of plaintiffs' evidence. The jury returned verdicts in favor of Missimi, Kopani and Burge and against three other former employee-plaintiffs. No appeal was taken by the latter three.

Whiteco now appeals the judgment entered in favor of the employees and Kordos appeals the judgment on the evidence entered against him.

The principal contention asserted by Whiteco is that the oral contracts of employment were within the Statute of Frauds and, thus, were unenforceable. It asserts that consequently the actual employment was subject to termination at any time.

The employees respond by conceding that the contracts were within the statute but, they assert, the statute should nevertheless be held inapplicable on grounds of promissory estoppel or constructive fraud. ²

Whiteco contends that promissory estoppel and constructive fraud should be unavailable because they were not pleaded. It also contends that under the facts those doctrines are inapplicable.

Whiteco first asserts the failure of the employees to plead promissory estoppel or constructive fraud should have precluded finding in their favor on the basis of either contention. The argument is in error for two reasons.

Whiteco raised the Statute of Frauds defense in its answer. It claims the employees were then required to plead their avoidance of the statute in a reply. That, however, is not the requirement under our modern rules of pleading. Pursuant to Indiana Rules of Procedure, Trial Rule 7(A) a reply to an answer is not ordinarily necessary although the court in its discretion may order one.

"Matters formerly required to be pleaded by a reply or other subsequent pleading may be proved even though they are not pleaded."

Trial Rule 7(A). See, e.g., Nichols v. Amax Coal Co. (1986), Ind., 490 N.E.2d 754.

In the second place, the court set up these defenses to the statute as issues under the pretrial order. TR 16(J) authorizes the court following the pretrial conference to enter an order reciting inter alia "the amendments allowed to the pleading." When this was done those issues became issues for trial. City of Hammond v. Drangmeister (1977), 173 Ind.App. 476, 364 N.E.2d 157.

We turn then to the substance of these defenses with two initial observations.

The parties have consistently referred to the employees' theory of defense as "promissory estoppel." While that term is, perhaps, more familiar when employed in the context of an argument concerning lack of consideration, it has also been employed in a Statute of Frauds context. See, e.g. Annot., 56 A.L.R.3d 1037.

Also, the parties have combined for purposes of argument the claims of promissory estoppel and constructive fraud. We shall, therefore, do the same. ³

The employees list five factors which, under the evidence favorable to them, they contend support avoidance of the Statute of Frauds. These are: (1) an express promise of one year employment; (2) the employees gave up their existing employment to accept the jobs; (3) they moved to Indiana from other states; two purchased homes and were confronted with the problem of what to do about selling these homes or seeking new employment outside their chosen field; (4) the timing of the termination made it extra-difficult to secure immediate work in theatre; and (5) the employees' job performance had been above and beyond reasonable expectation and constituted additional consideration.

First of all we note that the factors relied on do not possess the quality of those which courts have found sufficient to constitute an independent consideration.

As we explained in Ohio Table Pad Co. v. Hogan (1981), Ind.App., 424 N.E.2d 144, neither the actions involved in moving one's household to a new location nor the mere relinquishment of an existing employment are sufficient to constitute independent consideration. Such actions are considered as merely placing the employee in a position to accept the employment. (It is also factually noteworthy that Whiteco separately paid moving expenses for both Missimi and Kopani.) As to the contention that the employees' job performance had been above and beyond reasonable expectation and, thus, constituted independent consideration it is, we hope, sufficient to point out that appellees do not press the contention nor is it suggested that the parties bargained for less than the employees' best efforts.

It is only where a different and substantial detriment is incurred such as releasing a claim for personal injuries or assignment of a lease to the employer that separate consideration has been found to exist. 424 N.E.2d 146.

Can then the oral promise of a one year term when supplemented by such activities create an injurious reliance which will remove the bar of the Statute of Frauds?

The employees urge that promissory estoppel/constructive fraud should be invoked to prevent Whiteco from relying upon the statute. They further urge that the reasons which supported Statute of Frauds legislation are no longer valid; that equity should not permit the use of the statute to work a fraud rather than to prevent one; and that in any event they should be entitled to relief in accord with Restatement of Contracts, Second, Sec. 139.

Whether the Statute of Frauds in general, or that section relating to contracts not to be performed within one year, in particular, have become outmoded is a question more properly addressed to the General Assembly. It is not the function of this court to repeal acts of the legislature on grounds that they are unwise or outmoded.

The problem with the appellees' claim is that the promise it depends upon is the promise of a full year's employment. In other words, it is the very promise which the statute declares unenforceable that the employees assert should remove their claim from the statute's operation.

Our decisions have held that no claim of estoppel or fraud may be so premised.

As the Supreme Court stated in Kavanaugh v. England (1953), 232 Ind. 54, 59, 110 N.E.2d 329, 331, in adopting the rule from other jurisdictions:

"[A] mere breach or violation by one of the parties of an oral agreement which is within the statute of frauds, or his denial of the agreement or refusal to perform it, is not of itself a fraud, either in equity or at law from which the courts will give relief or which will enable the other party to assert either rights or defenses based on the contract. There is no fraud in such a refusal. The party so refusing stands upon the law and has a right to refuse to be bound by such a contract." (citations omitted)

See also ITT Cannon Electric, Inc. v. Brady (1967), 141 Ind.App. 506, 230 N.E.2d 114 (no estoppel or fraud removing bar...