Title: WINKEL v FAMILY HEALTH CARE P C

State: montana

Issuer: Montana Supreme Court

Document:

N O . 82-156 I N THE SUPREME COURT OF THE STATE OF MONTANA 1 9 8 3 DENNIS WINKEL, P l a i n t i f f a n d A p p e l l a n t , V S . FAMILY HEALTH CARE, P.C. a n d LOREN VRANISH, D e f e n d a n t a n d R e s p o n d e n t . A p p e a l f r o m : D i s t r i c t C o u r t o f t h e E l e v e n t h J u d i c i a l D i s t r i c t , I n a n d f o r t h e C o u n t y o f F l a t h e a d H o n o r a b l e R o b e r t S y k e s , J u d g e p r e s i d i n g . C o u n s e l o f R e c o r d : F o r A p p e l l a n t : Warden, C h r i s t i a n s e n , J o h n s o n & B e r g , K a l i s p e l l , Montana K r a t t e n , Muchin, Z a v i s , P e a r l & G a l l e r , C h i c a g o , I l l i n o i s F l o y d A.Mandel1 a r g u e d , C h i c a g o , I l l i n o i s F o r R e s p o n d e n t s : Murphy, R o b i n s o n , H e c k a t h o r n a n d P h i l l i p s , K a l i s p e l l , Montana I . J a m e s H e c k a t h o r n a r g u e d , K a l i s p e l l , Montana S u b m i t t e d : May 1 2 , 1 9 8 3 D e c i d e d : July 1 2 , 1 9 8 3 , , - I / & ,'Q/ ~ ~ ~ ~ ~ Y w L k ; c ~ - f l k C l e r k Mr. J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion of t h e C o u r t . Dennis Winkel f i l e d a complaint May 4, 1979, seeking an a c c o u n t i n g of prof its, damages and i n j u n c t i v e r e l i e f based upon s i x c a u s e s of a c t i o n a r i s i n g from h i s employment w i t h Family H e a l t h Care. Family Health Care counter-claimed f o r u n f a i r and d e c e p t i v e t r a d e p r a c t i c e s and m a l i c i o u s p r o s e c u t i o n . A j u r y t r i a l commenced i n t h e D i s t r i c t Court of t h e Eleventh J u d i c i a l D i s t r i c t , Flathead County, on November 1 6 , 1979. On November 1 9 , 1979, t h e j u r y rendered a s p e c i a l v e r d i c t f o r Winkel, f i n d i n g him e n t i t l e d t o a bonus of $30,942.41 and v a c a t i o n pay of $3,000. The D i s t r i c t Court e n t e r e d judgment a g a i n s t Family H e a l t h Care and V r a n i s h i n t h e amount of $33,942.41, p l u s $33,942.41, i n accordance w i t h s e c t i o n 39-3-206, MCA, and r e a s o n a b l e a t t o r n e y ' s f e e s . On December 4 , 1981, V r a n i s h f i l e d a l t e r n a t i v e motions f o r judgment f o r d e f e n d a n t n o t w i t h s t a n d i n g t h e v e r d i c t , f o r a new t r i a l and t o a l t e r and amend t h e judgment. On J a n u a r y 1 9 , 1982, t h e D i s t r i c t Court e n t e r e d a memorandum o p i n i o n agreeing w i t h t h e j u r y t h a t Winkel was e n t i t l e d t o a bonus and v a c a t i o n pay, b u t d i s a g r e e i n g w i t h t h e j u r y a s t o t h e amount of t h e bonus. F u r t h e r , t h e District Court f a i l e d t o a p p l y t h e s t a t u t o r y p e n a l t i e s f o r unpaid wages and a t t o r n e y ' s f e e s . The o r d e r a l s o s t a t e d t h a t , should Winkel f a i l t o a c c e p t t h e "modified" judgment, V r a n i s h would be e n t i t l e d t o a new t r i a l . Winkel appe a 1 s . Dennis Winkel e n t e r e d i n t o an employment c o n t r a c t w i t h Loren V r a n i s h , a doctor p r a c t i c i n g i n Flathead County. The terms of t h e c o n t r a c t , a s set f o r t h i n a l e t t e r dated February 1 5 , 1977, were a s f o l l o w s : (1) Annual s a l a r y of $26,000 t o be computed a s f o l l o w s : 1st 4 months $1,80O/month 2nd 4 months $2,20O/month 3 r d 4 months $2,50O/month ( 2 ) H o s p i t a l i z a t i o n and m a l p r a c t i c e i n s u r a n c e coverage; ( 3 ) Three weeks v a c a t i o n per y e a r ; ( 4 ) Option f o r f u l l p a r t n e r s h i p a f t e r one year of s a l a r i e d employment. Winkel commenced working f o r V r a n i s h i n J u l y 1977. A t t h a t time Dr. Max Quaas was a l s o working f o r Vranish. I n August 1977, V r a n i s h i n c o r p o r a t e d h i s medical p r a c t i c e under t h e name of Family Health Care, P.C. V r a n i s h was t h e pre- s i d e n t and s o l e s h a r e h o l d e r of t h e c o r p o r a t i o n . A t t h e same time, V r a n i s h conveyed h i s o f f i c e b u i l d i n g t o h i s w i f e , who began c h a r g i n g r e n t t o t h e c o r p o r a t i o n . I n December 1977, D r . Quaas ended h i s employment w i t h Family H e a l t h Care. Winkel's workload i n c r e a s e d g r e a t l y af t e r D r . Quaas l e f t , s o V r a n i s h i n c r e a s e d Winkel 's s a l a r y t o $3 ,OOO/month, s t a r t i n g J a n u a r y 1, 1978. Winkel t e s t i f i e d t h a t i n a d d i t i o n t o t h e s a l a r y i n c r e a s e , t h e following i n c e n t i v e s were o f f e r e d i n c o n s i d e r a t i o n of h i s c o n t i n u i n g a s s o c i a t i o n w i t h Family H e a l t h Care: (1) a p r o f i t s h a r i n g bonus; ( 2 ) a refund t o Winkel of a l l funds c o n t r i b u t e d t o Family H e a l t h C a r e ' s pension p l a n i n t h e e v e n t t h a t Winkel's employment was t e r m i n a t e d ; ( 3 ) f o u r weeks paid v a c a t i o n per y e a r ; and ( 4 ) a 50 p e r c e n t i n t e r e s t i n t h e o f f i c e b u i l d i n g t o Winkel's w i f e . I t was Winkel's understanding t h a t he would not be r e q u i r e d t o "buy i n " t o t h e c o r p o r a t i o n t o r e c e i v e t h e s e i n c e n t i v e s . V r a n i s h d i s a g r e e s . When Winkel's s a l a r y i n c r e a s e d i n J a n u a r y 1978, V r a n i s h t o l d h i s CPA t h a t he wanted t o make Winkel a f u l l and e q u a l s h a r e h o l d e r by August 1, 1978. T h e r e f o r e , V r a n i s h con- t e n d s t h a t t h e p r o f i t - s h a r i n g bonus and o t h e r i n c e n t i v e s were c o n t i n g e n t upon Winkel "buying in" t o t h e c o r p o r a t i o n . N e g o t i a t i o n s commenced toward e f f e c t u a t i n g t h i s "buy i n , " and i n August 1978, t h e p a r t i e s reached a temporary agreement. I t V r a n i s h d e s c r i b e d W i n k e l ' s mood a s " s u r l y " when he came t o work on Monday. T h e r e f o r e , Vranish had t h e r e c e p t i o n i s t c a n c e l Winkel's appointments. Winkel I s p a t i e n t s were given t h e o p t i o n o f s e e i n g V r a n i s h o r w a i t i n g t o s e e Winkel when he opened h i s new o f f ice. Winkel d i d not r e c e i v e t h e v a c a t i o n pay nor t h e $9,600 which V r a n i s h o f f e r e d t o pay i n h i s February 22, 1979, l e t t e r . A t t r i a l , Winkel t e s t i f i e d t h a t h i s c o n t r a c t u a l damages amounted t o $35,000. The j u r y found t h a t Winkel was e n t i t l e d t o v a c a t i o n pay of $3,000 and a p r o f i t - s h a r i n g bonus of $30,942.41. I n a post-judgment o r d e r , t h e District Court amended t h e judgment by d e c r e a s i n g t h e bonus award t o $9,600. The c o u r t s t a t e d : "By r e a s o n of t h e f a c t t h a t t h i s was t h e o n l y bonus considered i n t h e n e g o t i a t i o n s between t h e p a r t i e s and was t o a p p l y on t h e buy-in agreement, n e g o t i a t i o n s l i m i t e d t h e amount due P l a i n t i f f t o t h e sum of $9,607.51. The Defendant Family H e a l t h Care acknowledged t h i s amount by r e a s o n of n e g o t i a t i o n s between t h e two a s a b a s i s of p a r t of t h e P l a i n t i f f ' s p u r c h a s e . A t time of t e r m i n a t i o n , t h e defen- d a n t acknowledged same and o f f e r e d terms f o r payment. P l a i n t i f f agreed t o t h i s amount, b u t claimed a c o n t i n u a l bonus a s p a r t of s a l a r y ; and t h a t same was a c o n t i n u i n g b a s i s f o r employment. " Four i s s u e s a r e on a p p e a l . V r a n i s h a r g u e s t h e u n d e r l y i n g i s s u e f o r purposes of review is whether t h e o r i g i n a l w r i t t e n employment c o n t r a c t was amended a s a m a t t e r of law. V r a n i s h c o n t e n d s Winkel is o n l y e n t i t l e d t o r e c o v e r t h e amount of v a c a t i o n pay owing a t t h e time of Winkel's t e r m i n a t i o n . H e a r g u e s Winkel is n o t e n t i t l e d t o any p r o f i t - s h a r i n g bonus because t h e o r i g i n a l w r i t t e n employment c o n t r a c t d i d not provide f o r prof i t - s h a r i n g bonus and t h e w r i t t e n employment c o n t r a c t was never amended a s a m a t t e r of law. A c o n t r a c t i n w r i t i n g may be a l t e r e d by a c o n t r a c t o r by an executed o r a l agreement and not o t h e r w i s e . S e c t i o n 28-2-1602, MCA. An o r a l agreement a l t e r i n g a w r i t t e n agreement is not an executed o r a l agreement w i t h i n t h e s t a t u t e a u t h o r i z i n g modifica- t i o n of w r i t t e n c o n t r a c t s by an executed o r a l agreement u n l e s s its terms have been f u l l y performed, and performance on one s i d e is n o t s u f f i c i e n t . Stoddard v. Gookin ( 1 9 8 1 ) , Mont. , 625 P.2d 529, 534, 38 St.Rep. 326. An executed c o n t r a c t is one where nothing remains t o be done by e i t h e r p a r t y . An e x e c u t o r y c o n t r a c t is one i n which a p a r t y b i n d s himself t o do o r not t o do a p a r t i c u l a r t h i n g i n t h e f u t u r e . Bauer v. Monroe ( 1 9 4 5 ) , 117 Mont. 306, 316, 1 5 8 P.2d 485, 490. For Winkel t o be e n t i t l e d t o any p r o f i t - s h a r i n g bonus, we must f i n d t h e w r i t t e n employment agreement was a l t e r e d by an exe- c u t e d o r a l agreement. Winkel t e s t i f i e d i n December 1977, he and V r a n i s h reached an o r a l agreement t h a t Winkel would r e c e i v e a p r o f i t - s h a r i n g bonus. Thus t h e q u e s t i o n becomes, was t h i s o r a l agreement executed, i.e., f u l l y performed by both p a r t i e s . The answer comes from Winkel I s own testimony: "Q. And you went t o work under t h e agreement t h a t has been submitted i n evidence which was t h e l e t t e r from Dr. Quaas t o you e x p l a i n i n g what your s a l a r y would be, is t h a t c o r r e c t ? A. [Winkel] Y e s . "Q. And t h a t agreement t h e n a s f a r a s any w r i t i n g is concerned h a s never changed, i s n ' t t h a t c o r r e c t ? Anything o t h e r t h a n t h a t h a s been by word of mouth, been o r a l ? A. Yes. "Q. And t h e o n l y change t h a t was made and h a s been c o m p l e t e l y done, c o m p l e t e l y executed was t h e f a c t t h a t your s a l a r y was r a i s e d t o $3,000 r a t h e r t h a n twenty-two o r some f i g u r e ? A. Yes. "Q. And your testimony is t h a t t h e r e was promises made t o you t h a t something else would be done b u t t h e y have never been p u t i n t o e f f e c t , have t h e y ? They have never been completed? You have never g o t t e n anything o u t o f t h o s e ? A. T h a t is c o r r e c t ." From t h i s testimony w e s e e , a s a m a t t e r of law, t h e o r a l agreement concerning p r o f i t - s h a r i n g bonus was never performed, t h u s t h e o r a l agreement was n o t executed. W e f i n d Winkel was not e n t i t l e d t o any p r o f i t - s h a r i n g bonus when V r a n i s h t e r m i n a t e d Winkel I s employment. T h e r e f o r e , j u r y i n s t r u c t i o n no. 11, a l l o w i n g t h e j u r y t o f i n d Winkel was e n t i t l e d t o a bonus, was r e v e r s i b l e e r r o r and V r a n i s h is e n t i t l e d t o a new t r i a l on t h e i s s u e of accumulated v a c a t i o n time owing a t Winkel's t e r m i n a t i o n . Judgment g r a n t i n g new t r i a l is a££ irmed. Counter-claim is denied and dismissed. We concur: Chie Justice /. Justices 6 2 /& The Honorable R.C. ~c~o,&ouqh, District Judge, sittin6 in- place of the Honorable Frank B. Morrison, Jr. Mr. J u s t i c e John C. Sheehy, d i s s e n t i n g : I d i s s e n t . The o p i n i o n s i s s u i n g from t h i s Court g e t " c u r i o u s e r and c u r i o u s e r . " For example, Vranish cross-appealed i n t h i s c a s e . You w i l l read t h e m a j o r i t y o p i n i o n i n v a i n t o d i s c o v e r t h a t . Winkel r a i s e d f o u r i s s u e s on h i s a p p e a l froin t h e D i s t r i c t C o u r t ' s amended judgment. The m a j o r i t y f a i l s t o mention what t h e y a r e o r d i s c u s s them. I am n o t going t o d i s c u s s them i n d i s s e n t because I t h i n k Winkel is e n t i t l e d t o a r e h e a r i n g i n t h i s c a s e . If I should d i s c u s s them, it might be concluded t h a t t h e m a j o r i t y had c o n s i d e r e d Winkel's i s s u e s s o a s t o deny r e h e a r i n g under Rule 3 4 , M.R.App.Civ.P. 1 w i l l d i s c u s s them i n d e p t h i f t h i s Court d e n i e s r e h e a r i n g . I w i l l , however, d i s c u s s t h e s i n g l e ground on which t h e m a j o r i t y set a s i d e t h e j u r y v e r d i c t , t h e h o l d i n g t h a t Winkel cannot recover because h i s c l a i m is based on an o r a l amendment of a w r i t t e n c o n t r a c t . T h i s is n o t a c a s e of an o r a l amendment t o a w r i t t e n c o n t r a c t . The o n l y w r i t t e n c o n t r a c t i n t h i s c a s e a r i s e s from a l e t t e r d a t e d February 1 5 , 1977, from a Dr. Quaas, w r i t i n g on behalf of Vranish. Under t h a t agreement, Winkel would work f o r a set s a l a r y , and a f t e r one y e a r he would e n t e r i n t o a p a r t n e r s h i p i n c l u d i n g Winkel, Vranish and Quaas. Winkel, under t h e l e t t e r , would be employed by Vranish. T h i s agreement f o r e v e n t u a l p a r t n e r s h i p was never c a r r i e d o u t . I n s t e a d , Winkel came t o work f o r Vranish on J u l y 1, 1977. On August 1, 1977, Vranish i n c o r p o r a t e d himself i n t o Family H e a l t h Care, and from t h a t d a t e on Winkel worked f o r t h e c o r p o r a t i o n and n o t f o r Vranish. Quaas l e f t t h e group i n November of 1977 ( h e a l s o was an employee of t h e corpora- t i o n when h e l e f t ) . When t h e February 1 5 , 1977, l e t t e r f o r p a r t n e r s h i p was w r i t t e n , Vranish owned t h e b u i l d i n g h e p r a c t i c e d i n ana charged no r e n t t o h i m s e l f . A t t h e t i m e of t h e i n c o r p o r a t i o n , he t r a n s f e r r e d t h e b u i l d i n g t o h i s w i f e , who c h a r g e d t h e c o r p o r a t i o n r e n t a l p r o s p e c t i v e l y a n d r e t r o s p e c t i v e l y . Before August 1, 1977, any p r o f i t produced by Winkel over h i s s a l a r y went t o Vranish p e r s o n a l l y . A f t e r August 1, 1977, such p r o f i t from W i n k e l ' s p r o d u c t i o n went t o t h e p r o f e s s i o n a l c o r p o r a t i o n . I t d e f i e s common s e n s e , and t h e law a s I understand it, t o hold t h a t an implied c o n t r a c t of employment by a new e n t i t y is merely an o r a l amendment of a w r i t t e n c o n t r a c t of employment by a former completely d i f f e r e n t e n t i t y . Vranish is a l e g a l e n t i t y ; h i s p r o f e s s i o n a l c o r p o r a t i o n is l e g a l l y a completely s e p a r a t e l e g a l e n t i t y . When Vranish ceased t o h i r e Winkel p e r s o n a l l y , t h e w r i t t e n c o n t r a c t under t h e p a r t n e r s h i p l e t t e r e x p i r e d . When Winkel's employment t r a n s - f e r r e d t o t h e c o r p o r a t i o n , h e began a new employment e x p e r i - ence w i t h a new employer. Winkel's employment by Vranish c a n n o t be i n t e g r a t e d w i t h h i s employment by t h e c o r p o r a t i o n , s o a s t o c o n s i d e r h i s new employment simply an o r a l amend- ment of a former w r i t t e n c o n t r a c t . The p a r t i e s a r e n o t t h e same. A f t e r August 1, 1977, Winkel was working under a completely d i f f e r e n t c o n t r a c t , an o r a l c o n t r a c t based on new promises. Vranish was n o t h i s employer, b u t a co-employee of t h e same c o r p o r a t i o n . Winkel's c a u s e of a c t i o n on a c o n t r a c t b a s i s i n t h i s a c t i o n is a g a i n s t t h e c o r p o r a t i o n and n o t a g a i n s t Vranish. Here, t h e j u r y d e c i d e d t h a t Winkel was d e p r i v e d of a s h a r e of t h e c o r p o r a t i o n ' s p r o f i t s due him under h i s o r a l c o n t r a c t of employment by t h e c o r p o r a t i o n . The m a j o r i t y b r u s h a s i d e t h a t d e c i s i o n by an i n c o r r e c t c o n c e p t i o n of t h e i s s u e s h e r e . I would a t t h e l e a s t r e i n s t a t e t h e j u r y v e r d i c t a g a i n s t t h e c o r p o r a t i o n . The f a c t s of t h i s case show a v a l i d o r a l a b r o g a t i o n o f a w r i t t e n c o n t r a c t and t h e s u b s t i t u t i o n of an e n f o r c e a b l e o r a l c o n t r a c t . W e s h o u l d f o l l o w t h e l e a d o f C a l i f o r n i a i n such c a s e and i g n o r e t h e p r o v i s i o n s of s e c t i o n 28-2-1602, IYCA, t h a t a w r i t t e n c o n t r a c t may be a l t e r e d o n l y by a c o n t r a c t i n w r i t i n g as n o t a p p l i c a b l e . See, P e a r s a l l v. Henry ( 1 9 0 8 ) , 153 Ca1.314, 325, 95 P. 154, 157; K l e i n Norton Co. v. Cohen ( 1 9 3 0 ) , 107 Cal.App. 325, 330, 290 P. 613, 616. Mot t h o u g h t o f , c e r t a i n l y n o t d i s c u s s e d , by t h e m a j o r i t y is t h e t r u e impact of s e c t i o n 28-2-1602, MCA, and its i n t e r p r e t a t i o n by t h i s Court is Dalakow v. Geery ( 1 9 5 7 ) , 132 Mont. 457, 318 P.2d 253. Recognize f i r s t t h a t s e c t i o n 28-2-1602, MCA, is n o t a p a r t of t h e s t a t u t e of f r a u d s , which w e have i n s t a t u t e form i n s e c t i o n 28-2-903, MCA. The p r o v i s i o n t h a t a w r i t t e n con- t r a c t may o n l y be a l t e r e d by a n o t h e r w r i t t e n c o n t r a c t , sec- t i o n 28-2-1602, was "borrowed from t h e l a w governing s e a l e d i n s t r u m e n t s , and now g e n e r a l l y r e l a x e d even a s t o them," i n t h e words of W i l l i s t o n , who c a l l s it an " u n f o r t u n a t e l e g i s - l a t i v e a d o p t i o n f o r w r i t t e n c o n t r a c t s . " 1 5 W i l l i s t o n on C o n t r a c t s ( 3 r d E d . ) 495, f n . 6 , s e c t i o n 1828. C a l i f o r n i a , through t h e n J u s t i c e Traynor, moved away from a h a r s h i n t e r p r e t a t i o n of its c o u n t e r p a r t t o s e c t i o n 28-2-1602. The b a s i s of d i s t i n c t i o n was a d d i t i o n a l c o n s i - d e r a t i o n f o r t h e o r a l m o d i f i c a t i o n . Here, Winkel took o v e r a l a r g e s h a r e of t h e p r a c t i c e when Quaas l e f t t h e employment of t h e c o r p o r a t i o n , a v a l i d c o n s i d e r a t i o n . I n such c a s e , C a l i f o r n i a h e l d i n D.L. Godbey and Sons Const. Co. v. Deane " S e c t i o n 1698 of t h e C i v i l Code p r o v i d e s : ' A c o n t r a c t i n w r i t i n g may be a l t e r e d by a c o n t r a c t i n w r i t i n g , o r by a n executed o r a l agreement, and n o t o t h e r w i s e . ' . . . " S e c t i o n 1698 h a s a d u a l o p e r a t i o n . On t h e o n e hand i t i n v a l i d a t e s o r a l c o n t r a c t s o f m o d i f i c a t i o n t h a t a r e unexecuted, and on t h e o t h e r hand, it v a l i d a t e s executed agreements t h a t might o t h e r w i s e f a i l f o r l a c k of c o n s i d e r a t i o n . . . . "The s i t u a t i o n i s d i f f e r e n t , h o w e v e r , where t h e r e is c o n s i d e r a t i o n f o r t h e o r a l m o d i f i c a t i o n agreement. I n such cases t h e r i g h t s and d u t i e s of b o t h p a r t i e s t o t h e w r i t t e n c o n t r a c t a r e a f f e c t e d , and by performing t h e c o n t r a c t a s modified each p a r t y w i l l be i n a p o s i t i o n t o e x e c u t e t h e o r a l agreement on h i s s i d e . . . S i n c e p l a i n t i f f h a s a l l e g e d an a d e q u a t e c o n s i - d e r a t i o n f o r t h e o r a l m o d i f i c a t i o n and f u l l performance on its p a r t under t h e terms t h e r e o f , it has s t a t e d a c a u s e of action.'' T h i s Court followed t h e l e a d of t h e C a l i f o r n i a Godbey c a s e i n Dalakow, s u p r a , s a y i n g w e would i n t e r p r e t s e c t i o n 28-2-1602 a s d i d C a l i f o r n i a s i n c e w e adopted t h a t s t a t u t e from C a l i f o r n i a . I n Dalakow t h i s Court found t h a t one of t h e p a r t i e s t o a c o n t r a c t o r a l l y agreed t o do something he was n o t bound t o do under t h e w r i t t e n c o n t r a c t , and t h i s s u f f i c e d a s c o n s i d e r a t i o n f o r a n o r a l m o d i f i c a t i o n of t h e w r i t t e n c o n t r a c t . 132 Mont. a t 466-467, 318 P.2d a t 258-259. The s a l u t a r y r u l e of Dalakow i n t e r p r e t i n g s e c t i o n 28-2-1602 h a s by i m p l i c a t i o n been o v e r r u l e d by t h i s d e c i s i o n , w i t h o u t a b r e a t h of d i s c u s s i o n . Henceforth a l l w r i t t e n c o n t r a c t s i n blontana w i l l be g i v e n t h e f o r c e of s e a l e d i n s t r u m e n t s . I r e g a r d t h a t r e s u l t r e g r e s s i v e . a I concur in the foregoing dissent of Mr. Justice Sheehy. Mr. Justice Daniel J. Shea will file a written dissent later.