Powell v. Republic Creosoting Co.

Respondent Powell, who had been the manager of the Seattle branch of the defendant's business since 1916, resigned his position, effective December 1, 1930; and conceiving that he had not been paid in full for his services, brought this action claiming a balance of $2,153.80 due him for that part of the year 1930 over which his services extended. The case was tried on the merits to the court, sitting without a jury, resulting in findings and conclusions favorable to the plaintiff and a judgment thereon for the full amount demanded. From that judgment, the defendant has appealed.

The parties do not differ greatly as to the fundamental facts, but they are poles apart in the inferences and conclusions to be drawn therefrom. Stated briefly, what we regard as the governing facts are substantially as follows:

Respondent Powell, in 1913, was the city engineer of the city of Wenatchee, having a salary of $2,400 per annum with the privilege of engaging to some extent in the private practice of his profession. He became acquainted with the manager of the Minneapolis plant of the appellant company, a Mr. Larkin, and through him accepted an offer to move to Minneapolis, enter the employ of the appellant and apparently learn the business by working under Larkin. He remained there for some two years, receiving a salary of $2,500 per year, and perhaps a small bonus payment at Christmas time. In the latter part of the year 1915, the appellant company established a plant in the city of Seattle, and respondent Powell was sent there to manage that plant, beginning his services about the first of the year 1916.

For the years 1916 to 1919, inclusive, he was paid a salary at the rate of $3,600 per year in semi-monthly installments, and during those years he received a bonus, at or near the end of the year, in 1916, of $50; in 1917, of $200; in 1918, of $400, and in 1919, of $900. In 1920, his salary was $4,500, his bonus was $1,000. From 1921 to 1928, inclusive, his salary was $5,000 per annum and his bonuses were: 1921, $1,250; 1922, $1,500; 1923, $2,000; 1924, $2,150; 1925, $2,300; 1926, $2,500; 1927, $3,000; 1928, $3,150. In 1929, the last full year of his employment, he was paid a salary at the rate of $5,000 until October 1, when at his request his salary was increased by the sum of $100 per month, dating from October 1, 1929, and he therefore received in 1929 $5,300 as salary. In that year, he received as a bonus $3,250.

It will be observed that, from 1919 to 1929, inclusive, a period of eleven years, respondent Powell's annual compensation increased substantially and with some degree of regularity, mostly by reason of the bonus payments, which (except in the year 1920, when the percentage was slightly less) ran in amount from twenty-five per cent to as high as sixty-three per cent of his stated salary.

Respondent contends, and the trial court held, in effect, that this course of dealing was sufficient to constitute an implied contract between the respondent and the appellant that respondent should be compensated, in addition to his regular salary, by an adjustment at the end of each year, so that each year's total salary would at least equal the preceding total annual salary, and might exceed it if his efforts and the resulting prosperity of the business should indicate the justice and wisdom of increasing the salary by a bonus payment when the result of the year's business became apparent.

Upon the other hand, the appellant contends that the annual adjustments were gifts or bonuses pure and simple, made as a matter of generosity or as a matter of discretion to cement the loyalty and increase the efficiency of the employee. It accordingly contends that, in the year in which his resignation took effect, he, having received his salary at the rate of $6,200 per annum in semi-monthly payments up to December 1, was thereby paid in full, and had earned and is entitled to no additional or adjusted compensation for the eleven months of the year which he worked.

Mr. Reilly, the president and managing head of the appellant corporation, testified:

"The method and the time or times of taking up or determining the bonus, whether one was to be paid, and the amount, was that there was a general habit, but no hard and fast rule. I was of the mind that the company in the holiday season at the end of the year should show its appreciation to the employees who had shown their appreciation of their job, and who had worked faithfully and loyally to promote the company's interests.

"I took the matter up about the holiday period. I would know what the company's earnings were up to the first of December. I would then observe the volume of business done up to the time that I was considering the matter of bonuses. I would approximate the profits to be earned by the company in December. I would consider its cash position, as well as its business position, and then would make the distribution based on these facts as I observed them."

[1] Accepting all this at its face value, still we think, in view of the substantial amounts paid regularly over a long term of years, there was here something more than a pure gratuity.

In the beginning, the payment of $50, the bonus for the year 1916, may have been a gratuity only. Possibly the two succeeding years, when the bonus payments were $200 and $400 respectively, show nothing more than gratuities, but the eight years following, with substantial payments regularly made and regularly increasing, would seem to be something quite other than mere gifts, and to our minds this course of dealing suggests rather conclusively an implied agreement that respondent's annual salary should be the stated amount payable semi-monthly plus such additional sum as would be reasonable in the light of the services rendered for the particular year and the results accomplished thereby.

To illustrate, an employee who had actually received as compensation $8,000 for the year 1927 might be very glad to continue in the service upon the understanding that he would receive a like amount or more in succeeding years if his services and their results justified such a rate of pay; but if he felt that he was only legally entitled to a salary of $5,000 for the succeeding year and perhaps a gift over, would he not very likely be on the lookout for another position where his true worth would be recognized by an enforceable contract? Since both sides recognize that the employment might have been terminated at any time by either party, was not respondent induced to continue by the belief that he was to receive a salary of at least $8,000?

It does not necessarily follow that the total compensation earned by the respondent in 1930 must equal or exceed the total earned in 1929, because results were a factor to be taken into consideration each year in determining the value of respondent's services. The appellant might have pleaded and proved, if such were the fact, that respondent's services resulted in less profit to the company in the last year, or even that the profits of the company fell off without fault on the part of anyone, thus making the business as a whole less prosperous, less able to pay, less profitable to its stockholders and all concerned, and, of course, the services of everyone connected with it would, under those conditions, be less valuable than in the years of prosperity. Nothing of this kind was even suggested in the pleadings or hinted at in the testimony. On the contrary, it was shown that other branch managers received larger bonuses in the year 1930 than they did in the year 1929.

Respondent relies upon the case of Scott v. Duthie Co.,125 Wn. 470, 216 P. 853, 28 A.L.R. 328, and similar authorities. Appellant argues that these cases are based upon express contracts, and are therefore not applicable here. We are not advised that implied contracts differ in any degree from express contracts in the requirements as to mutuality and consideration. Here, as in the Scott case, we can find both mutuality and a sufficient consideration to support the contract.

As early as 1919, by conduct which was thereafter continued, the employer began to hold out to the employee the offer or implied promise that, if he would continue in the service (which he was not otherwise required to do), his compensation would be adjusted annually on a basis of reasonable value. The employee accepted the offer by continuing in the service; hence there was mutuality and a consideration moving to the employer, just as in the Scott case, supra. In discussing this question, it was there said:

"The promise here was, therefore, no ``nudum pactum' on that theory, nor is it one on the theory that the promise was one for additional pay to be given one already under contract to do the very work for which the additional pay was promised. The argument that the appellant cannot recover the bonus for the reason that he was paid his regular salary while in the respondent's employ overlooks the very idea conveyed by the word ``bonus,' which is ``an allowance in addition to what is . . . stipulated.' Standard Dictionary. The complaint shows that the appellant was free to quit his work at any time, and therefore was under no obligation to do the thing which the respondent was seeking to accomplish by its offer. The compliance with the terms of the offer created a contract supplementary to the contract of employment. By this supplementary contract the respondent agreed to reward the appellant for remaining in its employ and refraining ``from accepting employment elsewhere until this company shall complete the ships.'"

We conclude, therefore, that the trial court did not err in holding that respondent was entitled to compensation in the year 1930 at the same rate as was received in the year 1929.

The judgment is affirmed.

BEALS, C.J., MAIN, PARKER, MITCHELL, BLAKE, HOLCOMB, and MILLARD, JJ., concur.