Opinion ID: 2218201
Heading Depth: 2
Heading Rank: 2

Heading: group b

Text: Members of Group B claim they were told before or at the time of hiring that they would receive seven percent commissions forever on policies sold. Group B plaintiffs argue that defendant breached the express terms of their employment contracts by changing the payment system to award a flat rate upon the sale of each renewal policy. We disagree. We find the claimed promise by defendant that the seven percent renewal commissions would last forever to be unenforceable under the statute of frauds. The relevant section of the statute of frauds, MCL 566.132(a); MSA 26.922(a), provides in pertinent part: In the following cases an agreement, contract or promise shall be void, unless that agreement, contract, or promise, or a note or memorandum thereof is in writing and signed by the party to be charged therewith, or by a person authorized by him: (a) An agreement that, by its terms, is not to be performed within 1 year from the making thereof. To determine whether an agreement comes within this section, the proper inquiry is whether the contract is capable of performance within one year of the agreement. This Court discussed the rule in Smalley v Mitchell, 110 Mich 650, 652; 68 NW 978 (1896): The mere fact that the contract may or may not be performed within the year does not bring it within the statute. The rule is that if, by any possibility, it is capable of being completed within a year, it is not within the statute.... [See also Fothergill v McKay Press, 361 Mich 666; 106 NW2d 215 (1960).] In Drummey v Henry, 115 Mich App 107; 320 NW2d 309 (1982), the plaintiff sued the defendant for sales commissions allegedly owed under an oral employment contract. The defendant countered that any such agreement could not be performed within one year and was unenforceable under the statute of frauds. The trial court directed a verdict for the defendant on the basis of the statute of frauds. The Court of Appeals reversed, finding that the record was devoid of evidence showing that the agreement could not be performed within one year. The Court stated that it was possible, though unlikely, that the plaintiff would have made sales within the first year. Thus, the contract was capable of performance within one year and outside the statute of frauds. Defendant argues that McLaughlin v Ford Motor Co, 269 F2d 120 (CA 6, 1959), controls this case. In McLaughlin, the plaintiff was promised by the defendant that after he worked for one year in the cost department, he would be offered a position in general management. The plaintiff began working several days after the oral agreement was reached. After working for more than three years, and without being offered a general management position, the plaintiff was discharged. The plaintiff sued the defendant for failing to uphold its promise, and, subsequently, the jury found for the defendant. On appeal, the court affirmed, finding that the agreement was invalid under the statute of frauds. The court reasoned that the parol agreement was invalid because the plaintiff could not have become a general manager until more than one year had elapsed from the time of the agreement. The agreement was not capable of performance within one year. Thus, the agreement was barred by the statute of frauds. In the instant case, the Court of Appeals distinguished McLaughlin because plaintiffs [in Dumas ] were not seeking to enforce a promise that they would receive the renewal commissions. Instead, plaintiffs sought to enforce a promise that the commissions would be paid as long as plaintiffs were employed by defendant. 168 Mich App 632. However, we are not persuaded by the Court of Appeals attempt to distinguish McLaughlin. We find that plaintiffs were seeking to enforce the payment of seven percent renewal commissions as long as they were employed by defendant. Similar to McLaughlin where the plaintiff sued to enforce the agreement with regard to the general management position, in the present case plaintiffs sued to enforce agreements encompassing promised renewal commissions which could not accrue until more than one year from the time of the agreement. Nor are we persuaded by Justice LEVIN'S argument that McLaughlin is distinguishable from the present case because McLaughlin involves a contract for a definite term. Justice LEVIN states: The Hodge [ v Evans Financial Corp, 262 US App DC 151; 823 F2d 559 (1987)] court addressed the kind of contract considered in McLaughlin, and in the three Michigan cases on which McLaughlin relied, when it said: Under the conventional view of the statute, an oral employment contract for a stated, definite term of years exceeding one year (like those alleged in Prouty [ v Nat'l R Passenger Corp, 572 F Supp 200 (D DC, 1983)] and Gebhard [ v GAF Corp, 59 FRD 504 (DC, 1973)]) is unenforceable on the rationale that the employee's possible death within one year would `defeat' rather than `complete' the express terms of the contract. [ Post, p 612.] However, the contract in McLaughlin was clearly not one for a definite term. In McLaughlin, the plaintiff signed an employment agreement providing `I understand that my employment is not for any definite term and may be terminated at any time....' 269 F2d 123. Furthermore, the court stated that [i]t will be noticed that the oral contract does not provide for a specified period of employment. Id. at 125. We can certainly agree with Justice LEVIN that a contract for an indefinite term has traditionally been considered capable of performance within the first year. Thus, employment contracts for indefinite terms are generally outside the statute. We can also agree that the contracts involved in the instant case were of indefinite duration. However, we do not hold, as Justice LEVIN suggests ( post, pp 574-575), that each plaintiff's entire employment contract is unenforceable under the statute of frauds. We simply find that the asserted promises of seven percent renewal commissions forever are unenforceable. Furthermore, the dissent does not focus on the kind of promise at issue in this case. In the Hodge case relied on by the dissent, the primary issue was whether the plaintiff was wrongfully discharged. Thus, the focus was on the duration of the entire employment contract. The instant case differs from Hodge because the primary focus is on one term of the entire employment contract that plaintiffs are entitled to seven percent renewal commissions permanently. The dispute here is not over duration of an entire employment contract; nor is it over an employee's discharge. [6] In Michigan, if the terms of a contract are not severable, and part of a contract is within and part is outside the statute of frauds, the entire contract is unenforceable. Where a portion of a contract within the statute of frauds is severable from a part of the contract outside the statute, the severable portion alone will be rendered unenforceable. Cassidy v Kraft-Phenix Cheese Corp, 285 Mich 426; 280 NW 814 (1938); 73 Am Jur 2d, Statute of Frauds, § 523, p 153. In City of Lansing v Lansing Twp, 356 Mich 641, 658; 97 NW2d 804 (1959), the Court stated: As a general rule, a contract is entire when, by its terms, nature and purpose, it contemplates that each and all of its parts are interdependent and common to one another and to the consideration, and is severable when, in its nature and purpose, it is susceptible of division and apportionment. The singleness or apportionability of the consideration appears to be the principal test. The question is ordinarily determined by inquiring whether the contract embraces one or more subject matters, whether the obligation is due at the same time to the same person, and whether the consideration is entire or apportioned. If the consideration to be paid is single and entire, the contract must be held to be entire, although the subject thereof may consist of several distinct and wholly independent items. In Stevenson v Brotherhoods Mutual Benefit, 312 Mich 81, 88; 19 NW2d 494 (1945), the Court found that the plaintiff had been properly dismissed under a just-cause contract. The plaintiff was a field representative for the defendant insurance company, and he claimed that despite his dismissal he was entitled to commissions, including renewals, which were due at the time he was discharged. The defendant argued that the plaintiff's breach barred him from recovery of commissions because the contract was indivisible. The Court quoted from Beach on the Modern Law of Contracts, § 731, p 887: A familiar and well-settled principle of the common law is that an entire contract cannot be apportioned. The good sense and reasonableness of the particular case must always guide and govern courts in determining whether a contract is divisible or entire. The question depends, to some extent, upon the intention of the parties, and this must be discovered in each case by considering the language employed and the subject matter of the contract. No precise rule can be laid down for the solution of the question. When the price is expressly apportioned by the contract, or the apportionment may be implied by law, to each item to be performed, the contract will generally be held to be severable.  [Emphasis in original.] After viewing the circumstances surrounding the agreement, the Court decided the contract was severable and the plaintiff could collect the commissions to which he was entitled at the time of his departure. In the instant case, we find the provisions affording seven percent renewal commissions to plaintiffs severable from the remainder of the employment contracts. The agreements between the parties were that plaintiffs would receive a seven percent commission on each renewal of an old policy. The consideration for each renewal can be clearly and easily apportioned  for each policy successfully renewed by an employee, the employee is paid seven percent of the premium. There is no problem apportioning the consideration with regard to promised renewal commissions, and the nature of the contracts are such that they are susceptible of division and apportionment. City of Lansing, supra at 658. We find the claimed promise that Group B would remain under the then-existing compensation plan forever fits squarely within the statute of frauds and is unenforceable. Members of Group B were allegedly promised before or at the time of hiring that seven percent renewals would last forever. Under the Accrued Commission Plan, the renewal commissions could not vest before one year had elapsed from the time of hiring. The agreement with regard to renewals was not capable of performance within one year because it was not possible for renewal commissions to accrue until after the first year. Thus, any promise that the renewal commission plan would last forever is unenforceable under the statute of frauds. [7] Plaintiffs argue that the doctrine of part performance removes the agreement from the statute of frauds. The doctrine is explained in Guzorek v Williams, 300 Mich 633, 638-639; 2 NW2d 796 (1942): If one party to an oral contract, in reliance upon the contract, has performed his obligation thereunder so that it would be a fraud upon him to allow the other party to repudiate the contract, by interposing the statute, equity will regard the contract as removed from the operation of the statute. However, in support of their argument that part performance removes the case from the statute, plaintiffs only cite cases involving land. No cases are offered which apply the doctrine in an employment context. In Oxley v Ralston Purina Co, 349 F2d 328, 332 (CA 6, 1965), the court stated that [t]he doctrine of part performance has historically been applied only to contracts involving the sale of land.... Citing 3 Williston, Contracts (3d ed), § 533, p 770. In Ordon v Johnson, 346 Mich 38, 46; 77 NW2d 377 (1956), quoting Pomeroy, Specific Performance (3d ed), § 100, p 241, it was stated: The clause relating to contracts not to be performed within a year from the making thereof, seems by its very terms, to prevent any validating effect of part performance upon all agreements embraced within it. As the prohibition relates not to the subject matter, nor to the nature of the undertaking, but to the time of the performance itself, it seems impossible for any part performance to alter the relations of the parties, by rendering the contract one which, by its terms, may be performed within the year. [Emphasis in original.] We find the doctrine of part performance to be inapplicable to this case. Plaintiffs offer no support that the doctrine applies to the situation presented by this case other than cases involving land. Furthermore, past decisions of this Court have declined to recognize that the part performance doctrine operates to remove a contract from the statute of frauds section concerning contracts not to be performed within a year. Ordon v Johnson, supra ; Whipple v Parker, 29 Mich 369 (1874). [8] Accordingly, we decline to apply the part performance doctrine to the facts of this case. [9] There being no enforceable agreement that plaintiffs would be paid a seven percent commission forever, members of Group B find themselves in the same position as members of Group A, and we have already determined that members of Group A cannot maintain actions for breach of contract against defendant.