IN THE COURT OF APPEALS OF TENNESSEE AT KNOXVILLE Filed September 15, 1999 MICHAEL PHILLIPS, ) C/A NO. 03A01-9901-CH-00030 ) Plaintiff-A ppellant, ) UNICOI CHANCERY ) v. ) HON . THO MA S J. SE ELE Y, JR., ) CHANCELL OR MO RRIL L EL ECT RIC, IN C., ) ) VACATED AND Defendant-Appellee. ) REMANDED

TONY SEA TON and LEE H ERRIN, LAW O FFICES OF TON Y SEATON , Johnson City, for Plaintiff -Appellan t. WILLIAM C. BOVENDER a nd STEP HEN M. DARDEN,HUNTER, S MITH & DAVIS, LLP, Johnson City, for Defendant -Appellee.

O P I N I

O N

Franks, J.

In this action f or breach o f employm ent contrac t, the defend antemployer was grant

ed summary judgment by the Trial Court , and plainti ff-employee has app ealed. On November 10, 1994, plainti ff-employee and defenda nt-employer entered into an e

mployment agreement pr oviding that plaintiff was to be e mployed for a term of five years as a Special Assistant t

o the President

of the company. The agreement contained a

clause regardi

ng termination t

hat stated: 5. Termination for Cause : For good and sufficient cause, Employer may t

erminate thi s Agreement at any t ime upon giving writt

en2 notice to Employee specifyi ng the reasons for such terminati on. The following specific gro unds, wh ile not exclus ive, shall con stitute sufficient r

easons for termina

tion of this

Agreement for cause: A. If the Employee shall engage in any conduct or activi

ty which would be a material br

each of his obligat

ions under this

Agreement; or B. If t he Empl oyee

shall be c onvicted of

any o ffens e or cr

ime punishable as a fel

ony or otherwis e involving moral t urpitude; or C. If Em ployee shall en gage in an y act or condu ct which w ould be a violati on of any rule,law or regulation relating t o the conduct of Employer’s busi

ness and which would subject Employ er to civil

or criminal liabilit

ies. Defendant’s President

,Giles Morrill , died unexpectedl y on May 22, 1997. Vice President, William E. “Bud” King, assumed the role of Pre sident of the company and King began to restructure the company, and eliminated several positions, including that

of Special Assist

ant to the Pres ident. He stat ed that in his

new “organizational chart” there was no place for an Assistant to the President, regardless of who had worked in that capacit y. He reassigned plaintiff to a production j ob at the

com pan y’s Ro cky F ork f acili ty.

After the death of Morri ll, his widow and daught er approached Paul Farnor and asked him to become a member of t he Board of Directors. Mr. Farnor was elected to Chair

man of the Board in June of 1997, and bet ween July 18, 1997,and August 18, 1997, Farnor eval uated the plai

ntiff’s perf

ormance. He reviewed the documents in plaint

iff’s personnel

file and inte

rviewed co-workers as t o plaintiff’ s job performance. Farnor concluded that pla intiff was making no cont ribution t

o the comp any. On Au gust 18, 19 97, Farno r met with P hillips and ask ed Phillips to leave the company “qui etly” wit h six months benefits and pay. He tol d plaintiff t

hat he had not bee n contr ibuting to the co mpan y, and tha t he “ha d been move d aroun d,” and that his peer

s were giving negati

ve feedback about him. Far nor gave plainti

ff a copy of the notes from that meeting. On September 8, 1997, Farnor gave Phillips a3

“separation notice.” This notice stat ed that Phillips was discharged for cause “because he engaged in conduct and act ivities which are a material

breach of his obligations under his employ

ment agreement.” Pla

intiff then br

ought this act

ion, allegi

ng that he had been wrongfully t

erminated in vi olation of his employment contr

act, and that

he did not receive a

dequate notice of t

ermination in a

ccordance with the employ ment agreement, which als o constitut ed a breach of the agreement . This appeal ensued, following the Trial Co urt’s grant of summa ry judgment to defenda nt.

In evaluatin g a motion for summ ary judgmen t, a trial court shou ld consider “(1) whethe

r a factual di spute exists ; (2) whether the disputed fact i s material to the outcome of the case; and (3) whether t he disputed fact c

reates a genuine i ssue for a trial .” Byrd v. H all , 847 S.W.2d 208, 214 (Tenn. 1993) . When reviewing the action of th e Trial Co urt, this Cour t must view the eviden ce in the light m ost favora ble to the oppo nent of the motion, an d all legitimate c onclusion s of fact m ust be draw n in favor o f the op ponen t. Gray v. Amos , 869 S .W.2d 925 (T enn. A pp. 199 3).

In an action for wron gful discha rge in breac h of contra ct, the burde n is on the plainti

ff to prove all f

acts essential to his caus e of action. The employ ee establishe s a prima fac ie case by prov ing the con tract, his perfo rmance th ereof up to the time of his di scharge, and the da mage resulting fr

om the discharge tha

t is in brea

ch of the contract . 30 C.J.S. Employ er-Employee Relat

ionship §89(a) ( 1992). Where the contract requi

res good cause for a di scharge, the employer has the bur den of proving such g ood ca use. Id . At §89(b).

It is plai ntiff’s posi

tion that he was di scharged due to the r estructuri

ng of the company, and t

herefore was not disc

harged for cause as r

equired under the Employment Agreement, and fur ther that t

he defendant further

breached the Agreement by not giving plaintiff adequate notice of his termination and the reasons.

Plaintiff was hi

red to the speci

fic position of “Special Assist ant to the4

President” wit

h such duties and res

ponsibilit

ies as assi gned to him by the Pr esident or Board of Directors. The Employment Agreement stat es that ini

tial duti es will incl

ude assistance in the establishment and codification of corporate policies and procedures, and also to formulat

e and provide implementa tion for enhancement of manufacturing productivit

y. It was fur

ther agreed that

future assignment

s would include duties and responsibil

ities commensurat

e with a senior management position for employ er. The term of employment would cont inue through November 27, 1999. When King took over the role of Pre sident following the death of Morrill, he vaca

ted plainti

ff from his positi

on and reassigned him t o a production job, which plaintiff

described as work on the pr oduction line a

nd “helping with depart ment assessments and re

view, which was essenti ally proc ess engineering or plant engineerin g kind of work.” H e also stated th at by the time he left work w ith defenda nt, his position “ had been reduced f ive levels.” N either his pay no r benefits was cut with the change of positions.

When an employee is hir ed to fill a pa

rticular position, a

ny material demotion or change of duti es constitut

es a breach of the cont

ract, unles s the contract contemplates a change i n rank and nature of job.30 C.J.S. Employer -Employee Relatio nship § 52 (19 92); D avid J. O liveiri, A nnotatio n, Reduction in Rank or Authority or Change of Duti es as Breach of Employment Contract , 63 A.L.R.3d 539 (1975 ). Also see Smi th v. Ameri can General Corp oration, NLT , 1987 WL 15144 (Tenn .App. 1 987).

In Moore Coa l Co. v. Br own , 64 S.W.2d 3 (Tenn. 1933),involving a change of duties under a n employment contr

act, the par

ties were held t

o have modified the employ

ment agreement resul

ting in no breach. In Balderac chie v. Ruth , 256 S.W.2d 390 (Tenn. App. 1953), t he Court held that

modification of an exi sting contract cannot be acc omplished by the unilateral action of one of the parties. Rather,5

there must be the s ame mutuality of assent and meeting of minds as required t

o make a contract, and new ne gotiations ca nnot affe ct a comp leted contrac t unless they resu lt in a new agreement. Moreover, a modifi cation of an exist

ing contract ca

nnot arise from an ambiguous course of deali ng between the parties from which diverse i nferences might reasonably

be drawn as to whether the cont ract remained i

n its origi

nal form or was ch anged

. Id.

The reassignment of pla intiff to a j ob “five levels” lower than the job for which he was hired without more, would constitut

e a breach of the employ ment contract. Plaintiff was hir ed for a specific

position of Speci al Assistant to the President, a

nd his duties were des cribed in the employment agreement as being compara ble to that of s enior man agemen t. While his sa lary remained the same, h is duties we re significan tly diminished w ith his reassign ment to a p roduction jo b, and it has been held that s

uch a demotion can be charact erized as a dis charge of the emplo yee. See 30 C.J.S. Employer -Employee Relati

onship §52 (1992). The defendant has the burde n of showing the modificat ion of the contrac

t by mutual as sent or of establi shing facts ei ther consti

tuting an accord or

forming the basis

of an estopp el. Id. A contract for a defi nite term may

not be terminat

ed before the end of the term except for

cause or by mutual

agreement, unles s the right t o do so is reserved in the contract. 30 C.J.S. Employer-Employee Relationship §38. An employer has a right to di scharge an employee at any ti me for just cause. The fact that the employer bears with the i

ncompetency or ir

regularit ies of such employee for a time does not estop the em ployer from d ischarging the emplo yee for such in compete ncy if it continu es. Little v. Federal Container Corp. , 452 S.W.2d 87 5 (Tenn. App . 1969), citing Glasgow v. Hood , 57 S.W. 162 (Tenn.Chan.App. 1900)and Jackson v. Texas Co. , 10 Tenn.App . 235 (Tenn.Ap p. 1929).6 The Trial Judge h eld that plaintiff was fired for g ood cause, and there was no genuine issue of mater ial fact as t

o the cause of termi

nation. Good cause for discharge is found w hen the employee acts in a w ay that tends to injure his employer’s busine ss, intere sts, or rep utation. 3 0 C.J.S . Emplo yer-Emp loyee Re lationsh ip §60. Whether good cause exists to terminate

an employment contr

act is a deter

mination made on a case-by-case basis, and ex ists only where the discharg e is “objective ly reasonable.” Video Catalog Channel, Inc. v. Blackwelder , 1997 WL 581120 (Tenn.App. 19 97) citing 30 C.J.S. Employer-Em ployee Relationship §60 (1 992).

The Trial Judge rel

ied heavily

on an admission by t

he plaintiff

that he was fired for cause. W hen aske d why he w as terminate d from the job at Mo rrill Moto rs, plaintif f respo nded “ for cau se.” Ho weve r, this state ment is n ot dispo sitive. Plaintiff cou ld have m erely been rep eating the rea son he w as given fo r his termination. This may evince t he fact that plaintiff knew the company was discharging hi

m for cause and not for some othe r reason. Nonethel

ess, the st

ated reason for termi

nation and the act

ual reason for t

ermination may

not coincide. There are disputed i ssues of material fact as to the t

rue cause of plaintiff’ s termination. On the one hand, plai ntiff’s posi

tion was eliminat

ed in the restructuring of the comp any, and on the other hand there is evidence that plaintiff’s job perfor mance w as not acce ptable to the d efendan t.

Section 5 of the Employ ment Agreement states

that “for good and sufficient ca

use, Employer may

terminate t

his Agreement at any

time upon giving written notice to the employee specifying the reasons f or such termination .” (Emphasis added). Pl aintiff cont ends there is a di spute as to whether he received adequ ate writt en notic e for the reason s for his termina tion.

Defend ant points to th ree written d ocumen ts as eviden ce of ade quate noti ce of t

he te rmina tion and th e rea sons t

heref or. F irs t, de fenda nt poi nts t o a memo7

dated May 9, 1997, re

primanding plaint

iff’s job perf

ormance. Next, defendant relies on a hand-written copy

of the minutes of the

August 18, 1997 meeting, t hat was furnished to pla

intiff. Defendant

states tha

t it was in t

hat meeting that

plaintiff was terminated, and the notes contai n notice, in wri

ting, of plai

ntiff’s deficiencies. At t he time plaint

iff was advised that

“he was simply not

contributi

ng to the company, and he had been moved around and his peers a re giving negati

ve feedback about him.” Plaintiff count

ers that i n the meeting “ther

e was no discussion of t ermination for cause.” However, the not es from the meeting i

ndicate that

plaintiff was bei

ng terminated from hi s position. The third writt en notice to pl aintiff was the s eparation notice completed on Sept ember 8, 1997. This st

ated that pl aintiff was dis charged because “ he engag ed in cond uct and ac tivities which are a materia l breach of his obligati ons un der his e mploym ent agre emen t.”

Plaintiff r

elies upon the depos ition of Farnor t o support his posi

tion that he was not given adequate not ice of his ter

mination. Farnor

was asked if he had, at any time, gi

ven plaintiff

“written noti

ce specifyi

ng the reasons for hi s termination”, and Farnor responded that he did not. Farnor

was then asked if any

other writt

en reprimand s in plaintiff’s f ile specified a reason fo r termination , to which F arnor again replied “no.”

Farnor further stated that he had no knowledge of anyone els e in the company giving pla

intiff any thing in writ

ing specify

ing the reasons for

termination. There is a genuine i ssue of fact as t o whether any of the wri tten documents cited by

the defendant sat

isfy the not

ice requirement . While defendant argues that i

t did sati sfy this

requirement, t

he Chairman of defendant’s Board of Directors a dmits that he never gav e plaintiff w ritten notice of the reasons for his termination,

nor knew of anyone else i n the company providi

ng such notice. On this issue, an employee who is summaril y discharged wit

h less notice than spec ified und er th e con tract may r ecov er co mpe nsat ion f or th e no tice p erio d on ly,8

and no t for the balanc e of the contrac t period

. See 27 Am .Jur.2d, Employment Relationsh ip §43 (1996).

Ther e are dis puted is sues

of mat eri al f act to be res olved, a

nd we therefore vacate the summary judgment and remand for trial on these issues.

We vacate the summary j udgment and remand with cost of t he appeal assessed to the defen dant.

__________________________ Herschel P. Franks, J.

CONCUR:

___________________________ Charles D. Susano, Jr., J.

___________________________ D. Michael Swiney, J.