Yarborough v. Hi-Flier Manufacturing Co.

1. An oral agreement entered into in 1934, which provided that the plaintiff was to have the exclusive sale of the defendant's products in a designated territory, and that the contract was to continue from year to year until and unless it was terminated by either party on or before July 1st of the calendar year next preceding the business season for the sale of the defendant's products, falls within the provisions of the statute of frauds, as an "agreement . . that is not to be performed within one year from the making thereof."

2. While an oral contract of employment, within the statute of frauds, may be taken out by part performance thereof where one party to the contract performs some act essential to the performance of the contract which results in loss to him and benefit to the other party thereto, the mere fact that one party entered upon the performance of the agreement, and made "his arrangements, and entered into the business of the defendant [other party] as he had been doing for many years for the 1939-1940 season," which shows no loss to him or benefit to the other party, was not sufficient to take the contract out of the operation of the statute.

DECIDED NOVEMBER 27, 1940. W. A. Yarborough sued out an attachment against Hi-Flier Manufacturing Company, a non-resident corporation. Thereafter the plaintiff filed a declaration in attachment from which the following appears: The plaintiff is a broker in the City of Atlanta, and for more than five years has had the account of the defendant and has represented the defendant in the "southern territory," including Georgia; (par. 4) that he entered into a contract with the defendant to handle the defendant's goods in such territory, and it was "understood" that the contract was to be continuous from year to year "unless it was terminated by one of the parties on or before August of the calendar year next preceding the business season for the products of the defendant." The plaintiff further alleged that he had expended large sums of money in building up the defendant's business in the territory, and that the business was built up to such an extent that it was profitable to the plaintiff and the commissions earned by him averaged a net income to him of about $750 yearly; that there was no intimation or notice from the defendant of any intention to cancel the contract or discontinue the plaintiff's representation of the defendant in the territory for the year 1939-1940; that the plaintiff made all his arrangements and entered into the business as he had been doing for many years, for the 1939-1940 season, and that on September 29, 1939, he received a notice from the defendant that other arrangements had been made for working the territory and the plaintiff had been supplanted by another representative for the defendant therein; that this was in violation of the agreement, and that at the time the plaintiff received this notice he was actively engaged in representing the defendant in the territory and was actually taking orders for the 1939-1940 season. It was further alleged that it is the custom, which is well understood among brokers and manufacturers, that representation of a manufacturer by a broker is not to be terminated after the "season begins" and after the "broker representative" has entered upon the duties of representing the manufacturer for a year after the season opens. The plaintiff further alleged that the defendant violated the agreement by supplanting him in the territory without notice as required by the contract, and that the plaintiff has been thereby injured and damaged in the sum of $750. It was also alleged that the plaintiff stood ready and willing to perform, and notified the defendant that he would perform, all the duties as a representative of the defendant during the 1939-1940 season, and that he actually entered upon the performance of these duties, but that the defendant "absolutely refused to allow the plaintiff to carry out the contract between them" for that season.

The defendant demurred to the petition generally and upon various special grounds. The judge sustained certain of the special demurrers, and gave the plaintiff ten days in which to amend the petition. The order recited that the general demurrer was not then passed on. On February 19, 1940, the plaintiff amended the declaration, and alleged that he represented the defendant in certain designated territory including the State of Georgia, that the terms upon which he represented the defendant were upon a commission basis of ten per cent. of all merchandise sold in such territory for the defendant; that the contract between the parties was an oral agreement "the terms of which are set out in this paragraph;" that (specifically amending paragraph 4 of the declaration) the plaintiff represented the defendant in such territory upon a commission basis by which he was to receive ten per cent. on all merchandise sold by the defendant to the trade in that territory; that this agreement was oral and was to continue until terminated by written notice, and either party desiring to terminate the agreement was to give such notice to the other party on or before July 1, in the year that it was sought to be terminated (end of paragraph 2 of this amendment); that the plaintiff yearly sold and delivered about $15,000 worth of merchandise for the defendant in such territory; that his commission was approximately $1500 a year; that it cost him approximately ten per cent. of his commission to sell the merchandise in such territory; that he employed salesmen to assist him in representing the defendant in the designated territory; that for the last three years he has employed as many as three salesmen who assisted him in representing the defendant therein; that he received written notice from the defendant stating that the defendant had turned over this territory to another and it had been taken away from the plaintiff; that there is a custom adhered to by all manufacturing companies and brokers that if notice is not given of the termination of representation of manufacturers by brokers before the 4th of July of a calendar year, the broker is considered under such custom to have been "designated or appointed by the manufacturer as its representative for another year;" that this custom prevails in this territory; that prior to receiving the notice referred to the plaintiff had employed three salesmen to assist him in handling the defendant's merchandise in this territory, and the plaintiff had traveled over the territory in the interest of the defendant for the purpose of taking orders for the merchandise for the defendant; that it was the plaintiff's duty under the contract to take orders for and sell the defendant's merchandise in this territory, and he was to receive a commission of ten per cent. on all orders secured and merchandise shipped into this territory.

On February 29, 1940, the plaintiff again amended the declaration "by adding to paragraph 2 of the amendment filed by him on February 19, 1940, the following: That on or about the 1st day of July, 1939, he and the defendant entered into an oral agreement for the plaintiff to represent the defendant during the 1939 and 1940 season upon the same terms and upon the same conditions set out in the amendment filed on February 19, 1940. That the contract was renewed each year after its commencement by oral agreement." The defendant renewed its demurrers to the declaration as amended, and moved to dismiss the declaration on the ground that no cause of action was set forth against the defendant, and because the "declaration as amended shows on its face that it is a suit on an oral contract not to be performed within one year, and such is therefore not enforceable under the statute of frauds." The judge sustained the demurrer and dismissed the action; and the plaintiff excepted. One of the grounds of general demurrer was that it appeared from the declaration as amended that the suit was "on an oral contract not to be performed within one year, and such is therefore not enforceable under the statute of frauds." The statute of frauds embraces "any agreement . . that is not to be performed within one year from the making thereof." Code, § 20-401. In White v. Simplex Radio Company, 61 Ga. App. 157 (5 S.E.2d 922), following answer of the Supreme Court to certified question (188 Ga. 412, 3 S.E.2d 890), it was held: "An oral contract of employment, entered into in 1934 for the remainder of that year, which provided that it should continue from year to year thereafter, unless notice of intention to terminate it for any succeeding year be given by either party ninety days before December 31st of the preceding year, falls within the provisions of the statute of frauds, as an `agreement . . that is not to be performed within one year from the making thereof.' . . Accordingly, the person so employed can not maintain an action for breach of such contract for the year 1938, upon being discharged in February of that year (after having worked under said contract continuously since its inception), though no notice was given by the employer ninety days before December 31, 1937, of his intention to terminate the contract as of January 1, 1938." See also Morris v. Virginia CarolinaChemical Cor., 48 Ga. App. 702 (173 S.E. 486);Dameron v. Liberty National Life Insurance Co.,56 Ga. App. 257 (192 S.E. 446). It appears from the declaration as amended that the oral contract, under which the plaintiff was engaged in the sale of the defendant's products in the designated territory, was to continue from year to year until and unless it was terminated by one of the parties on or before July 1 of the calendar year next preceding the business season for the sale of the defendant's products; and that no notice of termination of this agreement having been given by the defendant to the plaintiff on or before such date the plaintiff entered into the performance of the contract for the 1939-1940 season. Under the ruling made in the White case, supra, the contract fell within the statute of frauds. Code, § 20-401(5).

The principle of law that where a contract of employment is made for a year's services, and at the end of the year nothing is said or done by either party to terminate it, but on the contrary the employee is allowed to continue without objection, the presumption is that both parties have assented to the contract continuing in force for another year, and the oral agreement for another year's employment is therefore not within the statute, has no application to the facts of the present case since the only contract here alleged and sued on was one beginning about five years before the 1939-1940 season and continuing from year to year thereafter unless notice of intention to terminate such agreement for any succeeding year be given by either party on or before July 1 of the preceding year. This agreement was not to be performed in a year and was therefore not enforceable under the statute of frauds.

The amendment of February 29, 1940, added to paragraph 4 of the declaration as amended by paragraph 2 of the amendment of February 19, 1940, that on or about July 1, 1939, the plaintiff and the defendant entered into an oral agreement by which the plaintiff would represent the defendant during the 1939-1940 season upon the same terms and conditions as in the previous years, and that such "contract was renewed each year after its commencement by oral agreement" does not, since it appears elsewhere that the season begins in September, show an oral contract to begin in praesenti. The plaintiff's declaration, as thus amended by both amendments, clearly shows an oral contract not performable within a year, and therefore one within the statute of frauds.

Nor does it appear from the declaration as amended, that there was such a part performance of the contract as would take it without the statute of frauds. See Code, § 20-402, which provides: "The foregoing section does not extend to the following cases, viz.: 1. When the contract has been fully executed. 2. Where there has been performance on one side, accepted by the other in accordance with the contract. 3. Where there has been such part performance of the contract as would render it a fraud of the party refusing to comply, if the court did not compel a performance." No loss is shown to have been incurred by the plaintiff, and no performance in accordance with the terms of the contract of benefit to the defendant appears. The fact that the plaintiff made plans and began to work under the contract from July 1 to September 29, 1939, is not such part performance as to take it without the statute of frauds. SeeAlexander-Seewald Co. v. Marett, 53 Ga. App. 314 (185 S.E. 589); Neuhoff v. Swift Co., 54 Ga. App. 651 (188 S.E. 831); Morris v. Virginia-Carolina ChemicalCor., supra; Dameron v. Liberty National Life Ins. Co., supra; Bentley v. Smith, 3 Ga. App. 242 (59 S.E. 720);Bagwell v. Milam, 9 Ga. App. 315 (4) (71 S.E. 684). It does not appear from the declaration as amended that the plaintiff did more than to make his arrangements and enter into the business of the defendant "as he had been doing for many years, for the 1939-1940 season." This, as appears from the contract, shows no such loss to him or benefit to the other party as would render it a fraud on the plaintiff for the other party to fail to carry out the contract. While it is alleged generally that the plaintiff employed salesmen to assist him in representing the defendant in the designated territory and that for the last three years he had employed as many as three salesmen, it does not appear that the plaintiff had employed salesmen and paid them salaries, or incurred any expense in connection therewith for the 1939-1940 season.

Applying the above principles, the declaration as amended failed to set out a cause of action, and the trial court did not err in sustaining the general demurrer thereto and in dismissing the declaration.

Judgment affirmed. Sutton and Felton, JJ., concur.