Court Opinion

ID: 5840444
Source: CourtListenerOpinion
Date Created: 2022-01-12 22:59:37.266688+00
Date Added: 2024-06-11T08:43:45.008992
License: Public Domain

Carro, J. (partial dissent).
Gould and Fell were the sole stockholders of the "Gould-Fell Companies”, i.e., Village, Goodline and Gould Co. They hired plaintiff Abady in 1972 as manufacturing manager. In January, 1975 they advised him that they were about to sell out to Interco, but were to continue to run the companies and intended to retain their key employees, including Abady. In March, 1975 the sale of their stock was completed, and Gould and Fell were given three-year employment contracts with Interco and a bonus *486"earnings payments” contract, based upon the average pretax net profits of the corporation for the three calendar years ending February 28, 1978. On May 24, 1977, that agreement was amended to change the base period on which the Gould-Fell "earnings payments” were to be computed, to the three-year period ending February 28, 1979.
Abady alleges a three-year oral employment contract with Gould and Fell on the same terms as his prior employment with them except that, "if for any reason they should leave Interco prior to the three years, then the contract would be off because * * * it would be up to Interco at that time.” In addition, in order to induce Abady to remain in their employ and to use his best efforts to maximize the earnings payments from Interco, Gould and Fell entered into a written contract, dated March 25, 1975, with Abady to the effect that, in the event he is an employee during said earnings period, Gould and Fell, each individually, shall pay to him an amount equal to 1 Vi% of the earnings payment, if any, received by them, pursuant to their agreement with Interco. Abady continued to work for the Gould-Fell companies until October 8, 1976, when he was fired by Gould.
Abady sued to recover damages for breach of the oral contract of employment and breach of his earnings-payments-participation (i.e., profit-sharing) contract. During the trial, the court denied plaintiff’s offer of proof to show that the base period upon which the profit sharing was to be computed was changed from February 28, 1976-78 to February 28, 1977-79, by amendment to Gould and Fell’s contract with Interco. The jury returned a verdict in favor of plaintiff on his claim of wrongful termination of the oral three-year employment contract and in favor of plaintiff, on a special verdict as to liability, on his earnings-participation agreement. The trial court set aside the jury verdict and dismissed the complaint as to the oral employment contract, on the ground that it was unenforceable because of the Statute of Frauds, and computed plaintiff’s damages under the participation agreement in the sum of $2,760.27.
Since Abady expressly states his oral employment contract with Gould and Fell was for a period exceeding one year, i.e., three years, it is by its terms within the Statute of Frauds (General Obligations Law, § 5-701, subd a), unless performance is possible within one year or unless "some note or memoran*487dum thereof [is] in writing, and subscribed by the party to be charged therewith”.
Plaintiff argues the general rule that if performance is possible within the year, however unlikely or improbable that may be, the agreement does not come within the proscription of the statute. Thus, he maintains, the oral provision that "if for any reason they should leave Interco prior to the three years, then the contract would be off because * * * it would be up to Interco at that time” provides for the possibility of performance within a year, thereby taking his oral contract out from the statute. However, we perceive this provision to be destructive of, and not in fulfillment of the contract. "As a general rule, if an agreement cannot be completely performed within a year, the fact that further performance may be excused or rendered impossible by the happening of a contingency is not sufficient to take it out of the statute, for an excuse for no further performance is not equivalent to full performance. In other words, termination of a contract by reason of the impossibility of further performance as a result of the happening of a contingency is not performance, but rather destruction, of the contract, and the court must distinguish between 'performance’ which fulfils the contract and circumstances which defeat its purpose.” (56 NY Jur, Statute of Frauds, § 21.) As the court said in Zupan v Blumberg (2 NY2d 547, 552) "The contract was not, then, one which might be performed within a year, but rather one which could only be terminated within that period * * * The possibility of such wrongful termination is not, of course, the same as the possibility of performance within the statutory period.”
Justice Lupiano observes that the earnings-participation agreement between Abady, Gould and Fell serves as a sufficient memorandum under the statute of the oral employment contract. I disagree.
Pertinent portions of that agreement are reproduced as follows:
"agreement dated as of March 25, 1975 among Sidney Gould ('Gould’), Theodore Fell ('Fell’) and A1 Abady (Employee). * * *
"The Employee is presently an employee of one or more of the Constituent Corporations and intends to continue as an employee thereof during the Earnings Period. In order to induce the Employee to remain so employed and to use his best efforts to maximize the Earnings Payments, Gould and *488Fell desire to compensate the Employee as provided for herein.
"now, therefore, the parties hereto, desiring legally to be bound, hereby agree as follows:
"1. In the event the Employee is an employee of one or more of the Constituent Corporations or their successors during the Earnings Period, each of Gould and Fell, severally and not jointly, shall pay to the Employee an amount equal to 1V2% of the Earnings Payment, if any, received by him from Interco pursuant to the Agreement.
"2. In the event the Employee is not employed by any of the Constituent Corporations or their successors for any reason during any portion ('Unemployed Portion’) of the Earnings Period, each payment to be made to the Employee pursuant to Section 1 hereof shall be reduced by an amount equal to the product of (a) such payment and (b) a fraction, the numerator of which is the number of days during the Unemployed Portion and the denominator of which is the total number of days during the Earnings Period.
"3. The foregoing to the contrary notwithstanding, in the event the Employee voluntarily terminates his employment with the Constituent Corporations or their successors during the Earnings Period or is discharged for cause, the Employee shall not be entitled to any payments under this Agreement. For purposes hereof, the term, 'cause’ means dishonesty or gross dereliction of duty.
"4. Gould and Fell, in their sole and absolute discretion, shall make all decisions with Interco concerning the average annual earnings of the Constituent Corporations or their successors, the amount and time of payment of the Earnings Payments and all other matters relating thereto, and their decisions shall be conclusive and binding on the Employee. The Employee’s sole right with respect thereto shall be to receive the payments provided for herein. * * *
"5. All payments to be made hereunder shall be in addition to any compensation the Employee may otherwise be entitled to receive from the Constituent Corporations or their successors * * *
"8. This Agreement * * * (b) contains the whole understanding of the parties with respect to the subject matter hereof, (c) may not be modified except by an instrument in writing signed by the party to be charged”.
*489To satisfy the Statute of Frauds, the written memorandum must state the entire contract with reasonable certainty, so that its substance will appear without any resort to parol evidence. It must completely evidence the contract which the parties made.
"It has long been settled that to satisfy the Statute of Frauds, the 'memorandum must contain substantially the whole agreement, and all its material terms and conditions, so that one reading it can understand from it what the agreement is’ ”. (Kobre v Instrument Systems Corp., 54 AD2d 625, 626, quoting Mentz v Newwitter, 122 NY 491, 497.)
The agreement partially reproduced above, fails this test. It does not refer to the same transaction as the oral contract and does not contain its terms. It was written for the specific purpose of inducing the plaintiff to remain in defendant’s employ during the earnings period and "to use his best efforts to maximize the Earnings Payments,” and we may not infer therefrom that the defendants intended to bind themselves to an employment for a definite term. It does not supply a fixed term of three years, but provides for percentage payments under certain conditions, if plaintiff’s association continues for up to a three-year period, to which plaintiff is not bound, nor does it contain a mention of the fixed, regular compensation to be earned by plaintiff as salary, etc. As Lupiano, J., stated in Belfert v Peoples Planning Corp. of Amer. (22 Misc 2d 753, 756-757, affd 11 AD2d 760) "At most, they [the writings] do no more in connection with the employment than to indicate the existence of a contractual relation between the parties or a possibility that the association may produce a working relationship for as long as [three] years but under circumstances rendering the association actually one at will. This is not enough to create an enforcible obligation”.
The "Earnings Period” as provided for in the recital clauses of the March 25, 1975 agreement between Gould, Fell and Abady, is the three-year period ending February 28, 1978. The November 27, 1974 agreement between Gould, Fell and Interco was amended on May 26, 1977 to change that "Earnings Period” to the three-year period ending February 28, 1979. This entitled Gould and Fell to receive their earnings payments computed on a formula using this new period as a base, and eliminating the year ending February 28, 1976. As it turned out, this was decidedly to their financial advantage.
At trial, Abady offered this amendment into evidence to *490show the actual base period used for the computations and the actual amounts received by Gould and Fell under their agreement with Interco. The application was denied and the evidence excluded and therefore not used by the trial court for the computation of Abady’s damages under his earnings participation contract.
Should Abady, not a party to the contract between Gould, Fell and Interco; and not a party to the May 24, 1977 amendment of that contract; and clearly not an intended beneficiary of that amendment, having been previously fired on October 8, 1976, nevertheless be entitled to enforce it against Gould and Fell, so as to receive its benefit?
I think not. It is the generally accepted rule that an intent to confer a direct benefit on a third party must clearly appear in order to enable such a party, not named in the contract, to recover thereunder. (Snyder Plumbing & Heating Corp. v Purcell, 9 AD2d 505.) The benefit so conferred must not be merely incidental. (Salzman v Holiday Inns, 48 AD2d 258.)
Since the "Earnings Period” for the calculation of the payments to Abady may not include the base year ending February 28, 1979, may it then include the base year ending February 28, 1976, which was eliminated from the formula by the May, 1977 amendment? Paragraph 1 of Abady’s March 25, 1975 agreement specifically states that Gould and Fell, "shall pay to the Employee an amount equal to 1 Vz% of the Earnings Payments, if any, received1 by him from Interco pursuant to the Agreement.” Quite evidently "1976” may not be included, since the first operative clause specifically provides that only earnings payments received by Gould and Fell shall be subject to Abady’s profit-sharing agreement, and that year’s figures were not in the formula upon which Gould and Fell received payment.
A conflict or ambiguity is therefore created, since, if the agreement is to*be given effect, only two years of the "Earnings Period” remain subject to the computations, while the recitals refer to a three-year "Earnings Period”. The recitals in a contract indicate the background and purpose of the parties, and where a recital and an operative clause are inconsistent, the operative clause should prevail (Musman v Modern Deb, 56 AD2d 752). Such inconsistency or ambiguity imposes upon the court a duty to reconcile and harmonize the *491apparently conflicting provisions (10 NY Jur, Contracts, § 214; Fox Film Corp. v Hirschman, 122 Misc 354, affd 212 App Div 837) and to effectuate the spirit and purpose of the agreement, which here was to permit the employee a share of the profits for that portion of the period during which he remained employed. It is the substance of an agreement rather than its form which must control its interpretation. (10 NY Jur, Contracts, § 194; Atwater & Co. v Panama R. R. Co., 246 NY 519.)
The March 25, 1975 agreement should therefore be interpreted to permit the use of the two years ending February 28, 1977 and February 28, 1978 as the base for Abady’s profit sharing.
Accordingly, I would modify the judgment herein to the extent only of remanding to the Supreme Court for proceedings not inconsistent herewith, to determine the plaintiff’s damages pursuant to that agreement and would otherwise affirm.
Ross, J. P., and Markewich, J., concur with Lupiano, J.; Bloom and Carro, JJ., dissent in part in separate opinions.
Judgment, Supreme Court, New York County, entered on October 2, 1979, modified, on the law, to the extent of reversing the dismissal of plaintiff’s complaint as against defendants Village Industries, Inc. and Goodline Sportswear, Inc., and plaintiff is awarded the sum of $15,105.50, with interest, as against defendants Village Industries, Inc. and Goodline Sportswear, Inc. with respect to his claim for damages for breach of his employment contract, and the amount of damages awarded plaintiff resulting from the breach of the agreement, dated March 25, 1975, as against defendants Sidney Gould and Theodore Fell, is revised upward to the sum of $2,924.32, with interest, and, as so modified, the judgment is affirmed.

. Emphasis added.