Worrell v. Multipress, Inc.

• Decision Date: 13 September 1989
• Docket Number: No. 88-535,88-535
• Citation: 45 Ohio St.3d 241,543 N.E.2d 1277
• Parties: , 58 USLW 2260, 9 UCC Rep.Serv.2d 1208 WORRELL, Appellee and Cross-Appellant, v. MULTIPRESS, INC. et al, Appellants and Cross-Appellees.
• Court: Ohio Supreme Court

Page 241

45 Ohio St.3d 241

543 N.E.2d 1277, 58 USLW 2260, 9 UCC Rep.Serv.2d 1208

WORRELL, Appellee and Cross-Appellant, v. MULTIPRESS, INC. et al, Appellants and Cross-Appellees.

No. 88-535.

Supreme Court of Ohio.

Submitted April 5, 1989.

Decided Sept. 13, 1989.

Syllabus by the Court

1. An oral promise to convey stock which does not require payment of a price, either immediately or as an option for purchase in the future, is not a "sale of securities" within the meaning of R.C. 1308.34, and such oral promise to convey is an enforceable agreement not subject to the Statute of Frauds.

2. Where an employee has been wrongfully discharged as a result of a breach of an employment contract, front pay, or lost future wages, may be awarded as compensation between the date of discharge and reemployment in a position of equal or similar status.

3. Among the factors to be considered in determining damages for lost future wages where an employee has been wrongfully discharged are (1) the age of the employee and his or her reasonable prospects of obtaining comparable employment elsewhere; (2) salary and other tangible benefits, such as bonuses and vacation pay; (3) expenses associated with finding new employment; and (4) the replacement value of fringe benefits, such as an automobile and insurance for a reasonable time until new employment is obtained.

Plaintiff-appellee and cross-appellant, John R. Worrell, filed suit against Multipress, Inc., Charles Grim, and National Industrial Acquisitions Corporation ("defendants"), alleging causes of action for breach of his contract of employment, breach of a contract for the transfer of stock, defamation, fraud, and an "action for mental distress."

A jury awarded plaintiff $500,000 in damages for loss of employment, $300,000 in damages for breach of an oral agreement to transfer stock, $50,000 in actual damages for defamation, and $100,000 in punitive damages. The jury found in favor of defendants on the issue of intentional infliction of serious emotional distress, and on the issue of fraud. Plaintiff subsequently petitioned the trial court for prejudgment interest, alleging defendants failed to make a good faith settlement offer. The trial court denied plaintiff's request for prejudgment interest.

Defendants appealed from the awards for breach of both oral contracts, and challenged the jury instructions given on the libel charge.

Plaintiff filed a cross-appeal urging, inter alia, that the trial court erred in denying his motion for prejudgment interest.

The court of appeals held that an oral contract of employment that is capable of being performed within one year because it contains a provision that the employee perform satisfactorily falls outside the Statute of Frauds and need not be in writing to be enforceable. The court of appeals upheld the jury's finding that Worrell was offered an indefinite employment contract terminable only upon just cause, and that at the time of discharge no just cause existed for the termination; held there was sufficient evidence for the jury to find that Worrell relied on Grim's promises, thereby allowing the doctrine of promissory estoppel to overcome Grim's contention that Worrell was merely an employee at will; and affirmed defendants' liability for breach of an employment contract.

However, the court of appeals agreed with defendants that the future-wages component of the award for breach of the employment contract was speculative. The court reasoned that plaintiff's future damages failed to take into account mitigation by partial earnings, and calculated that Worrell experienced a loss of $25,000 a year during the three years between discharge and trial. Thus, the court found the $500,000 award speculative to the extent that it included a loss of more than $25,000 per year through age sixty-five, reduced to its present value. The court ordered a new trial on this issue unless plaintiff accepted a remittitur to $244,183.

The court of appeals also held that the stock Worrell claimed as part of the employment contract was a "security," as defined in R.C. 1308.01, and was therefore subject to the requirements of the Statute of Frauds regarding securities pursuant to R.C. 1308.34. However, the court held that the trial court properly instructed the jury that the doctrine of promissory estoppel may overcome the requirements of the Statute of Frauds. The $300,000 damages award was affirmed.

The court of appeals also upheld the trial court's instruction to the jury that any qualified privilege that defendants had in making the defamatory statement contained in the business prospectus was defeated by proof of actual malice. Finally, the court of appeals held that the trial court's denial of prejudgment interest was not an abuse of discretion. The trial court judgment was affirmed in this respect.

The cause is before this court pursuant to the allowance of a motion and cross-motion to certify the record.

Porter, Wright, Morris & Arthur, Charles J. Kurtz III and Emily J. Lewis, Columbus, for appellee and cross-appellant.

Thompson, Hine & Flory, Thomas C. Scott, William R. Case, Barry L. Lubow and Judith A. Northrup, Columbus, for appellants and cross-appellees.

MOYER, Chief Justice.

We observe at the outset that defendants do not appeal the appellate court's decision regarding the validity of the oral contract of employment. We therefore restrict our review to the damages awarded for the wrongful discharge, the transfer of stock, the jury instructions regarding libel, and the plaintiff's cross-appeal claiming that he was wrongfully denied prejudgment interest.

I

First we consider whether plaintiff should have been denied recovery for defendants' breach of the oral contract to transfer ten percent of Multipress, Inc. corporate stock to him.

During the latter half of 1982, Worrell and Theodore P. Schwartz worked as promoters in obtaining an option for the purchase of a manufacturing business, the Multipress product line of the Denison Division of the Abex Corporation. Because they had no operating capital of their own, they sought financing from a number of banks and private investors. Finally, defendant Charles Grim agreed to provide approximately $700,000 of the necessary financing. In exchange, Grim demanded one hundred percent control and ownership of all the shares in the newly formed corporation--Multipress, Incorporated. Grim promised each man a position in the company as long as he performed satisfactorily, and agreed that both Worrell and Schwartz would each own ten percent of the stock of Multipress when the corporation was formed. Although plaintiff requested, and Grim agreed, that their agreement be reduced to writing, Grim never did so. Subsequently, Grim informed the men that it would be better not to place the stock in their names, but that he would hold the stock for them. The purchase of Denison Multipress was concluded in November 1982, and Multipress, Inc. began operating with Worrell serving as president and Schwartz as executive vice president.

In July 1983, Grim decided to place Multipress stock for public sale and a draft of the stock prospectus was prepared which contained no mention of Worrell's and Schwartz's ownership interests. When Worrell and Schwartz complained to Grim, he made it clear that all he had to offer them was a job and asked whether they wanted to remain members of the team. Schwartz accepted, but Worrell asked to meet with the corporation's attorney regarding his stock ownership. In response, Grim fired Worrell.

The General Assembly adopted portions of Uniform Commercial Code ("UCC") 8-102 in R.C. 1308.01, which provides in pertinent part:

"(A) As used in sections 1308.01 to 1308.44 of the Revised Code, unless the context otherwise requires:

"(1) A 'certificated security' is a share, participation, or other interest in property of or an enterprise of the issuer or an obligation of the issuer which is:

"(a) Represented by an instrument issued in bearer or registered form;

"(b) Of a type commonly dealt in upon securities exchanges or markets or commonly recognized in any area in which it is issued or dealt in as a medium for investment[.]"

A review of cases in other jurisdictions reveals that UCC 8-102 specifically applies to the sale of such securities as are commonly traded in securities exchanges or markets or which are commonly dealt with as mediums of investment. ¹ Furthermore, contracts for the sale or purchase of securities are covered by the Statute of Frauds pursuant to R.C. 1308.34, ² and must be in writing to be enforceable. See Riley v. Interep Associates, Inc. (N.D.Ga.1982), 533 F.Supp. 486, 487. The question therefore is whether the transaction under review here was a "sale" of securities.

Although "sale of securities" is not defined in UCC Chapter 8, UCC 2-106(1) [R.C. 1302.01(A)(11) ] provides that: "A 'sale' consists in the passing of title from the seller to the buyer for a price." Here the question can be resolved based on whether Grim's promise that ten percent of Multipress' stock would be transferred to Worrell constituted a "sale" as defined in the UCC. We think the promise to convey did not amount to a "sale." The arrangement between Grim and Worrell was one of promoter-investor. See Henderson v. Joplin (1974), 191 Neb. 827, 217 N.W.2d 920; see, also, Annotation, Validity and Construction of Preincorporation Agreement between Promoters as to Future Employment (1976), 66 A.L.R.3d 1138 (preincorporation agreements between promoters regarding employment and stock division will generally be honored absent a showing of fraud or bad faith between the parties).

Grim agreed to provide financing for the purchase of Denison Multipress as negotiated by Worrell and Schwartz with Abex Corp. The negotiations between Grim and Worrell and Schwartz resulted in eighty percent ownership for Grim and twenty percent ownership for Worrell and Schwartz in the new...