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November 27, 1946


The opinion of the court was delivered by: BYERS

This is a defendant's motion pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, 28 U.S.C.A.following section 723c, for an order dismissing the first cause of action as pleaded, on the ground that it fails to state a claim upon which relief can be granted; and for summary judgment pursuant to Rule 56 as to the remaining causes of action.

The plaintiff sues for breach of a contract of employment, alleging that prior to April 5, 1946, the parties negotiated for a new employment contract of three years' duration from January 1, 1946, and that on April 5th the plaintiff duly executed a contract prepared by the defendant 'and left it with the president of the defendant for execution by him and proceeded to go forward with his work pursuant to the terms of said contract, and was at all times ready, willing and able to continue the obligations under said contract on his part to be performed'.

 That according to its terms, the instrument sued upon provided that the plaintiff should be employed for a period of three years at an annual salary of $ 20,000.00 plus 10% of the net profits of the employer not to exceed $ 10,000.00 per annum, and that he entered upon the said employment and so continued until April 25, 1946, when he was discharged without cause or right; namely, the compensation which he would have earned for the balance of the year 1946 and for the years 1947 and 1948.

 In addition to the complaint, the motion papers consist of an affidavit made by one Rice, Vice-President of the defendant company, and an answering affidavit of the plaintiff. To the former are annexed the employment contract between the parties dated January 1, 1944, which seems to have been indefinite as to its duration, subject to the right of either party to terminate at any time, and which contract was in effect during the year 1946, and seemingly never was terminated, unless the alleged contract sued upon superseded it.

 There is also attached the proposed agreement in question which is the basis of this cause of action.

 There are also attached prior contracts not involved in the present controversy.

 The first office of that affidavit is to demonstrate that the contract under which the plaintiff sues was never executed by the defendant as employer.

 The answering affidavit contains the history of the relations between the parties established apparently in 1939 when the plaintiff says he was reemployed by the defendant 'as General Manager of the Embossed Products Division' of the defendant company, located at 539 West 25th Street, New York City, and that he continued in that capacity until the date of his discharge; that during the month of December, 1945, or thereabouts, he took up with officers of the defendant a suggestion concerning his future employment, apparently in connection with possible joint operation of an independent enterprise, and as the result of several discussions it was mutually decided in January of 1946 that a new contract should be negotiated between the parties, to be retroactive to January 1, 1946. Those discussions involved the basic wages and a bonus, and apparently under date of March 20, 1946, the defendant sent to the plaintiff a copy of an agreement as then proposed by the former, which constituted Exhibit C attached to the moving affidavit.

 On April 5, 1946, the plaintiff says he attended a conference in Richmond, where the defendant company has its headquarters, which was participated in by Louis Reynolds and R. S. Reynolds, Sr., officers of the defendant company, and at that conference he was handed a letter dated April 5, 1946, copy of which is attached to his affidavit, and the revised contract as then proposed. On this subject, he says:

 'We discussed the revisions and in particular the clause in paragraph (5) thereof giving the defendant the right to terminate the contract if I should fail to manage the business in a manner satisfactory to the President. I stated that I felt it was not necessary in view of the fact that * * * such a clause was mere excess. Although Mr. R. S. Reynolds Sr. agreed to sign without this clause, in the end, I signed the revised contract as submitted (Exhibit C) with the following change.

 'I had also requested that my basic salary be $ 20,000.00 a year with a bonus not to exceed $ 10,000.00. I stated that this in no way increased my agreed wage, which would remain $ 30,000.00. This was agreed upon, and the changes were inked in by Mr. Louis Reynolds (see Defendant's Exhibit C). Two copies of the contract were handed to me to sign, which I did immediately.

 'The contracts were then handed to Mr. R. S. Reynolds, Sr., who was the President of the defendant corporation, for his signature. Just as he was about to sign, Louis Reynolds stated in effect:

 "Dad, you can't sign that contract without Mr. Wishert's O.K. It's beyond your limit without Board approval."

 The plaintiff's affidavit continues, that he expressed surprise at this development, and he states why.

 Then he turned to Mr. R. S. Reynolds, Sr., and asked: 'Is this a deal?'

 'He took my hand and stated, definitely and without equivocation, 'Yes, Charlie, it's a deal."

 He says that he returned to New York entertaining no doubt that the contract would be signed, and the affidavit continues:

 'The contract I signed on April 5, 1946 (Exhibit C) was subsequently returned unexecuted by the defendant without explanation. I assumed that what was intended was that I should execute the contract transmitted on March 20,1946, with the special clause concerning discharge, which I did. (It is not clear as to whether there were two separate instruments signed by plaintiff, or only one.)

 'I continued on in my employment, and on April 25th Mr. Walter Rice telephoned me, telling me that I had signed the wrong contract. I felt that if they desired the clause permitting discharge in the contract which I had signed initially, I would satisfy them and return the said contract (Exhibit C) for their execution. Therefore, I immediately mailed these copies (Exhibit C) to Louis Reynolds.'

 The foregoing may be regarded as plaintiff's testimony on the subject, and the question is whether it establishes the contract upon which his first cause of action is based.

 It will be observed that there was an existing hiring under a contract which had not been terminated, and that the parties were engaged in negotiating a new agreement, as to which the terms were under discussion as late as April 5, 1946, when the plaintiff expressed himself as satisfied and affixed his signature, but execution by the defendant did not take place because apparently the President was advised that he did not have the requisite authority.

 If he did in fact lack the capacity to execute the written contract, he also lacked the authority to bind the corporation by saying: 'It's a deal.'

 That the plaintiff himself must have realized that something remained to be done, in a legal sense, appears from the above quotation from his affidavit, in reference to the return of the proposed contract unexecuted, for he says, to repeat: 'I assumed that what was intended was that I should execute the contract transmitted on March 20, 1946, * * * ', which seems to have been a paper other than Exhibit C, and that was the paper which he says he was told on April 25th was the wrong contract.

 The letter of March 20th is Exhibit 1 attached to the plaintiff's affidavit, and is addressed to the plaintiff, and states that it accompanies the 'proposed employment agreement which you discussed in Richmond last week with Mr. J. Louis Reynolds, Mr. R. S. Reynolds, Jr. and me'. The note closes with this: 'I hope that the agreement as now drafted meets with your approval. If it does, will you please execute both copies and return them to us for execution.'

 Exhibit 2 attached to the affidavit is a letter of April 5th, evidently the one handed to the plaintiff in Richmond. The first paragraph is:

 'I am sending you herewith two revised copies of your proposed employment contract. On explicit instruction from Mr. J. Louis Reynolds, I have made the following changes:' (Three in number)

 And the letter closes:

 'If the contract, as revised, is satisfactory to you, please execute both copies and return them so that they may be executed on behalf ...

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