Court Opinion

ID: 9858451
Source: CourtListenerOpinion
Date Created: 2023-09-24 16:24:12.782531+00
Date Added: 2024-06-11T09:54:26.910850
License: Public Domain

*166MESCHKE, Justice,
dissenting.
Mike Johnson was a salesman for Peter-bilt of Fargo, Inc. Their written “Salesman’s Compensation Agreement” said:
“THE SALESMAN AGREES TO DEVOTE HIS FULL TIME AND SERVICES TO THE COMPANY IN THE CAPACITY OF SALESMAN.
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“COMPENSATION
“THE COMPANY WILL PAY AND SALESMAN WILL ACCEPT AS THE ENTIRE COMPENSATION FOR SERVICES TO BE PERFORMED AS FOLLOWS:
“NEW AND USED — TRUCKS, TRAILERS, & GLIDER KITS “10% OR MORE GROSS PROFIT = 30% OF GROSS PROFIT “0% — 9.99% GROSS PROFIT = 25% OF GROSS PROFIT
“ALL THE ABOVE PERCENTAGES WILL BE COMPUTED FROM TOTAL COST (TOTAL COST TO INCLUDE FREIGHT AND SERVICE SCHEDULES PER ATTACHED SCHEDULE ‘A’).”
Their 4-page agreement also said: “COMMISSIONS WILL NOT BE PAID TO SALESMAN UNDER THE FOLLOWING CONDITIONS:
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“2. NO SALE SHALL BE CONSIDERED MADE UNTIL DELIVERY HAS BEEN MADE TO THE CUSTOMER AND PAYMENT HAS BEEN RECEIVED.
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“6. ON SALES WHERE THE UNIT OR UNITS ORDERED IS DELIVERED AFTER THE TERMINATION OF SALESMAN’S EMPLOYMENT, WHETHER SUCH TERMINATION BE VOLUNTARY OR OTHERWISE.”
Johnson quit in October 1985. He sued for commission on two sales. The first one was “written” on August 20, but not delivered and paid for until November 12, 1985. The second was “written” on October 3, but not delivered and paid for until November 30, 1985. The disputed commissions were $2,156.61 for the first sale and $1,972.07 for the second.
In dismissing Johnson’s claim, the trial court recognized that “the sale itself [was] the most crucial part” but went on to expand the written terms of the “Salesman’s Compensation Agreement” in describing Johnson’s duties:
“8. [Peterbilt] urges that the above term in the contract was necessary. Even though the sale itself is the most crucial part of the transaction, there remains a lot of work to be done when the truck is delivered to the buyer. These tasks include inspection of the truck with the buyer to see if all parts comply with the order. Additionally, some adjustments may be necessary between the buyer and [Peterbilt]. The salesman would also be engaged in the financing of the sale for the buyer.”
The trial court concluded that Johnson’s “employment contract clearly set[] out a term that commissions stop when employment cease[d].... ” The trial court also concluded that, absent unconscionability, unjust enrichment, or involuntary servitude, “this Court cannot reform a contract nor enter into the wisdom of a contract.”
The main thrust of Johnson’s argument on appeal was that the “language in question [was] violative of the public policy of the State of North Dakota and [was] therefore void.” He argued that, “in enacting § 34-03-09,” “the legislature ... intended, as all other right-thinking bodies have thought, ... that one is to be paid for one’s labor and that this should be, and is, the policy of our State.”
Johnson relied on decisions about general agency principles to support his public policy argument about the effect of the statute. In Heuvelman v. Triplett Electrical Instrument Co., 23 Ill.App.2d 231, 161 N.E.2d 875 (1959), Heuvelman had an oral agreement to sell electrical equipment for Triplett. After Triplett terminated his job, Heuvelman sued for commissions on catalog sales made before termination and on sales made after termination where “in the interval he serviced the accounts.” The *167trial court entered summary judgment against Heuvelman. On appeal, the court reversed, recognizing the “general rule ... in this and other jurisdictions ... that an agent or salesman who is the procuring cause of a sale is entitled to commission notwithstanding the fact that the sale was consummated by the principal personally or through another agent.” 161 N.E.2d at 878.
In J. & B. Motors v. Margolis, 75 Ariz. 392, 257 P.2d 588 (1953), Margolis, a used-car salesman, voluntarily left the employment of J. & B. Motors. A jury trial resulted in judgment in his favor for commissions on sales which were completed after the termination of his employment. The Arizona appellate court affirmed, saying:
“Unless the contract provides otherwise, if the activities of the agent, while the relationship of agency exists, are the procuring cause, he is entitled to his commission even though the principal himself ... may have ... completed the final act of negotiation after the employment ceases.” (Our emphasis). 257 P.2d at 592.
In Reed v. Kurdziel, 89 N.W.2d 479 (Mich.1958), Reed was fired as a salesman under an oral arrangement when he asked about commissions due him. He sued and recovered a judgment for commissions. Among the issues on appeal were several on sales completed after Reed’s termination. Again, the judgment was affirmed under the general principle, rejecting the employer’s position that it was otherwise agreed orally and noting that Reed’s employment was ended “for the purpose of [the employer] receiving the benefit of the sales activities of [Reed] without payment of the commissions.” 89 N.W.2d at 484.
In Reed v. Kaydon Engineering Corporation, 38 Mich.App. 353, 196 N.W.2d 487 (1972), the court of appeals reversed a summary judgment enforcing a clause in a written salesman’s agreement restricting commissions to goods shipped before the salesman’s job was terminated. The court of appeals said:
“On the scanty record presented, neither the trial court nor we could properly make a determination regarding the substantive reasonableness and enforceability of the contractual language relied on by Kaydon.” 196 N.W.2d at 489.
No issue of statutory public policy was raised.
In Oehlrich v. Gateway Realty of Columbus, Inc., 209 Neb. 417, 308 N.W.2d 327 (1981), listing commissions to a real estate salesman, for sales completed after his death, were adjudged due and affirmed. A contract clause said that rights to any commission accrued prior to termination “shall not be divested by such termination.” The court applied the general principle of agency that an agent is entitled to commission on sales procured by him even though the sales were consummated by the principal after the termination of the agency. No public policy was at stake.
Unfortunately, Johnson’s contract provided otherwise. Generally, where it is otherwise expressly agreed, a commission agent is not entitled to compensation for a partial performance, although the services benefit the employer. Restatement (Second) of Agency § 452 comment b (1958). See also Restatement (Second) of Agency § 453 comment a (“... [T]he parties are bound by the bargain which they make and if, adverting to the possibility of termination before performance is completed, they provide that no compensation shall be given for merely part performance, such agreement is enforced.”). Although his cited decisions were about interpreting the terms of his contract, Johnson’s argument is not. His argument is about the lawfulness of the contract denying payment to him for sales made before but completed after his departure.
Was it lawful for Johnson to agree to forego any compensation for his efforts on sales contracted by him but completed after his employment ended?
NDCC 9-08-01 says:
“Any provision of a contract is unlawful if it is:
“1. Contrary to an express provision of law;
*168“2. Contrary to the policy of express law, though not expressly prohibited; or
“3. Otherwise contrary to good morals.”
Johnson’s argument was that the limiting clause in his contract was contrary to the policy of the law expressed in NDCC 34-03-09:
“An employee who quits the service of his employer for good cause and an employee who is dismissed by his employer for good cause are entitled to such proportion of the compensation which would have become due upon full performance of the contract of employment as the services already rendered by such employee bear to the services he was obligated to render had the contract of employment been fully performed.”
This statute was enacted in 1961 to replace two prior statutes. One of those statutes denied “any compensation for services rendered since the last day upon which a payment became due to him under the contract” to “[a]n employee dismissed ... for good cause,” the worst kind of employee. Former NDCC 34-03-07 (1960). The other of those statutes mandated apportionment of compensation to “[a]n employee who quits the service of his employer for good cause,” the best kind of employee who leaves only for the most distressing reasons. Former NDCC 34-03-08 (1960). This apportionment formula was “such proportion of the compensation which would become due in case of full performance, as the services ... already rendered bear to the services ... to [be] rendered] as full performance.” Ibid. The new statute mandated this apportionment formula for good and bad employees alike, both those who quit and those who are fired. NDCC 34-03-09. Since “[t]he greater contains the less,” the statute applies to all employees whose employment has ended. NDCC 31-11-05(27); Wisdom v. State, N.D. Real Estate Commission, 403 N.W.2d 19 (N.D.1987).
The expressed legislative purpose of the 1961 enactment was “that it meant if a man was discharged, he will be paid for all services he had rendered.” (Page 2, Legislative Minutes of Committee Hearing of Feb. 10, 1961 on House Bill 837 in the Thirty-Seventh Legislative Assembly).
This declared legislative policy corresponds to, and seems to adopt and codify well-established remedial principles for all employees. Restatement (Second) of Agency § 456 says:
“If a principal properly discharges an agent for breach of contract, or the agent wrongfully renounces the employment, the principal is subject to liability to pay to the agent, with a deduction for [any] loss caused the principal by the breach of contract:
“(a) the agreed compensation for services properly rendered for which the compensation is apportioned in the contract, whether or not the agent’s breach is wilful and deliberate; and
“(b) the value, not exceeding the agreed ratable compensation, of services properly rendered for which the compensation is not apportioned if, but only if, the agent’s breach is not wilful and deliberate.”
The Restatement’s comments explain that this rule “is a special application of the rules stated in the Restatement of Contracts as to the rights of a. contracting party who is in default.” Comment a. Comment c explains: “Unapportioned services. If the agent has rendered services, compensation for which is not apportioned in the contract of service, and his renunciation or other breach of contract is not wilful, he is entitled to an amount equal to the fair value of his services, not exceeding the agreed compensation, minus any damage caused to the principal by his breach of contract.”
None of the cases cited in the majority opinion dealt with a statutory mandate of apportionment of compensation for all employees whose employment has ended. Powis v. Moore Machinery Co., 72 Cal.App.2d 344, 164 P.2d 822 (1945) upheld, as consistent with public policy but without citing any precedent or any statute, a written contract limiting commissions for selling machinery. The salesman voluntarily quit. *169His written agreement said: “... [W]e pay you commissions not only for your work in connection with contacting the customer” thereafter, including supervision, instruction and engineering services. The contract reduced commissions in half (from 2% to 1%) if the salesman “cease[d] to be employed by this company before the goods are so invoiced, delivered and paid for.” The trial court invalidated the employment agreement to the extent it applied a penalty and forfeiture. The court of appeals reversed, declared that the provision was intended as an “incentive” for the salesman to remain with the company, and held that the agreement was not invalid. Powis did not deal with an express public policy mandating apportionment of compensation upon termination of employment. In Johnson’s case, the question is whether the limiting provision conflicts with an express policy of law.
Similarly, Division of Labor Standards Enforcement v. Dick Bullis, Inc., 72 Cal.App.3d Supp. 52, 140 Cal.Rptr. 267 (1977) held that an auto salesperson’s employment contract, that “No commissions ... shall be payable to a salesman ... for any unit not actually delivered and licensed pri- or to termination of employment,” was not invalid as a penalty or forfeiture. The court of appeals relied on Powis v. Moore Machinery Co., supra. A statutory public policy mandating apportionment of compensation was not involved.
Likewise, in Fox v. Don Siebarth Pontiac, Inc., 458 So.2d 575 (La.App.3rd Cir.1984), the court of appeals affirmed a trial court finding that commission salesmen, one of whom had been terminated from employment by an automobile dealer, failed to prove that they were entitled to their commission for a particular transaction under their oral employment agreement. No public policy issue was raised.
On the other hand, this court has several times favored employers by invalidating commissions of salesmen for less specific public policy reasons. No expressed statutory policy was used in either case. In Mees v. Grewer, 63 N.D. 74, 245 N.W. 813 (1932), sales commissions on machinery were voided as against public policy because the salesman was “double-dipping,” seeking commission through an agreement with a wholesaler in addition to his agreed commission from the manufacturer. Similarly, in Glass v. Swimaster Corporation, 74 N.D. 282, 21 N.W.2d 468 (N.D.1946), this court denied an agreed commission to a salesman for sale of life-belts to the Navy, because it viewed the agreement as an improper means of securing official procurement action. Surely, if unfair terms requiring payment of commissions to employees can be voided for public policy reasons not expressed in statutes, unfair limitations on payment of compensation to employees can be voided for public policy reasons well expressed in a statute.
The majority opinion interprets NDCC 34-03-09 very narrowly as applying to only very disparate and discrete groups of employees, rather than the full range of employees from the best to the worst. This approach downplays the intended purpose of the expressed public policy, making it virtually meaningless.
When a public policy is made important by legislative enactment and when it would be frustrated by contradictory contracts, the policy outweighs enforcement of contrary contract terms. Erickson v. North Dakota State Fair Association, 54 N.D. 830, 211 N.W. 597 (1926); Krein v. Marian Manor Nursing Home, 415 N.W.2d 793 (N.D.1987); and NDCC 1-02-28 (“The benefit [of the provision of this code] may be waived by any party entitled thereto, unless such waiver would be against public policy.”) See also Restatement (Second) on Contracts § 178 (1981). I would give substantial weight to the statutory policy embodied in NDCC 34-03-09 as mandating apportionment of compensation to all employees, good and bad alike, when an employment is ended.
I would reverse and remand for redeter-mination of that proportion of the compensation which would have become due to Johnson upon completion of the two truck sales as his services rendered bear to the *170service he was obligated to render to complete those sales.
Therefore, I respectfully dissent.
LEVINE, J., concurs.