Opinion
Decided June 8, 1931.
Contracts — Damages for wrongfully discharging employee — Evidence — Parol evidence admissible to explain latent ambiguity, but not patent ambiguity — Surrounding circumstances, when contract made, admissible, when — Evidence inadmissible to clarify language authorizing cancellation of contract — Bad habits or improper conduct, not immoral or dishonest conduct — Question for jury — Physical or mental disability, or bad habits or improper conduct — Right to discharge for incompetence, implied in employment contract — No implied agreement upon written matters — Discharge for incompetency not precluded by express provisions — Existing rules of law read into contract — Verdict for whole salary for unexpired term, without deductions, erroneous.
1. Evidence of surrounding circumstances when employment contract was made is admissible to enable court to understand it, but not to vary or contradict it.
2. Provision in employment contract that, if employee from bad habits or improper conduct should not perform his duties to employer's satisfaction, latter might cancel contract, being unambiguous, evidence to clarify its language was inadmissible.
3. Common-law rule is that patent ambiguity may not, but that latent ambiguity may, be explained by parol evidence.
4. Provision in employment contract that employer might terminate it if employee, from "bad habits or improper conduct," did not perform his duties to employer's satisfaction, included "bad business habits" and "improper business conduct," and was not limited to immoral or dishonest conduct.
5. Existence of physical or mental disability, or bad habits or improper conduct, warranting termination of contract by employer, held for jury.
6. Master's right to discharge employee for incompetency is implied in employment contract.
7. No agreement can be implied as to matter expressly covered by written contract.
8. Provision, that employer might discharge employee if from physical or mental disability or bad habits or improper conduct he did not perform his duties to employer's satisfaction, did not prevent discharge for incompetency.
9. Existing rules of law enter into and form part of contracts to same extent as if they had been expressly incorporated into them.
10. In action for wrongful discharge, verdict for whole salary for unexpired term without deduction of probable future earnings, possible sickness or death, or discount for payment in advance, held erroneous.
ERROR: Court of Appeals for Lucas county.
Messrs. Fraser, Hiett, Wall Effler, for plaintiffs in error.
Messrs. Kirkbride, Boesel, Frease Cole, for defendant in error.
George I. Gilbert brought an action in the court of common pleas against Horton C. Rorick and others, who are partners as Spitzer-Rorick Company, to recover damages for wrongfully discharging him as an employee.
The first cause of action was to recover compensation for services performed, and was adjusted by the parties after suit was brought, the cause being submitted to the jury on the second cause of action only. On the second cause of action the plaintiff claimed damages in the amount of $15,000, for claimed wrongful discharge, and the jury returned a verdict for that sum, and judgment was entered thereon.
Many alleged errors are assigned, but it is deemed necessary to discuss only those that relate to the exclusion of evidence, the refusal to give certain written instructions before argument, the general charge of the court, and the claim that the judgment is excessive and against the evidence.
The contract between the parties is in writing and bears date of January 10, 1928, the employment being for the period of five years, extending from January 15, 1928, to January 15, 1933. Notice of discharge was served on Gilbert by the employer on January 14, 1930, based on the ground that he did not perform his duties to its satisfaction.
The contract provides, among other things, that Gilbert was to devote his entire time, influence and energies to the best of his ability to the business interests of the party of the first part and the Spitzer-Rorick Trust Savings Bank, during the period of his employment, as the party of the first part from time to time should direct. The compensation was fixed at $4,000 per year for the first year, and at $5,000 per year for each of the remaining four years, and it required the party of the second part to move from his residence in Oklahoma City, Oklahoma, to Toledo, Ohio. Paragraph 5 of the contract, which has caused most of the difficulty in determining the rights of the parties, reads as follows: "(5) It is also agreed that if said second party from any physical or mental disability, or from bad habits or improper conduct, shall not perform his duties to the satisfaction of said party of the first part, this agreement shall be null and void on sixty (60) days notice to said party of the second part by said first party."
The negotiations between the parties were opened by a letter from Gilbert written from Oklahoma City on December 14, 1927, in which he informs the company that he seeks employment and has had an abundance of first-hand experience in buying bonds. The company was then, for a long time had been, and still is, engaged in the bond business, and while the contract does not recite precisely what the duties of Gilbert were to be, yet from the situation and relation of the parties, and from the correspondence between them, which was introduced in evidence without objection, it is apparent that he was employed to assist in the purchase and sale of bonds and such securities as the company should choose to deal in and to perform such other duties "as said party of the first part may from time to time direct."
It is contended on behalf of Spitzer-Rorick Company that paragraph 5 of the contract above quoted is ambiguous, and that the trial court erred to the prejudice of defendant in excluding evidence offered to explain and clarify its language, the company contending that the evidence so offered was not for the purpose of varying or contradicting the contract, but to explain the ambiguous language, the meaning of the contract, as drawn, and the intention of the parties thereto.
After the parties had conducted a brief correspondence, Mr. Gilbert came to Toledo in order to discuss personally with the defendants the matter of making a contract, and the evidence excluded relates generally to what was said during these conversations leading up to the making of the contract. One question will suffice to illustrate the character of this evidence, and is as follows: "Will you please tell the court and jury the substance of those talks that took place at that time?" This question, and other like questions, were objected to; the objection being sustained and exceptions taken. It is undoubtedly proper to permit the circumstances surrounding the parties when a contract is entered into to be proven in order to enable the court to put itself in the place of the parties, the better to understand the terms employed; but not to contradict or vary the contract. The rule, with its limitations, is announced in Merchants National Bank v. Cole, 83 Ohio St. 50, 93 N.E. 465, Ann. Cas., 1912A, 773, but it must not be broadened to permit all negotiations and discussions occurring before a written contract is made to be introduced in evidence. So far as was necessary to place the court in the position of the parties in order to understand its terms, that was accomplished by the correspondence which was introduced in evidence without objection from either party. Although paragraph 5 may be difficult to construe, we do not think it is ambiguous, and even if it were, the ambiguity is patent and appears on the face of the contract itself. It has always been the rule of the common law that a patent ambiguity in a written instrument may not be explained by oral evidence, whereas the rule as to a latent ambiguity is otherwise. Zydel v. Clarkson, 29 Ohio App. 382, 163 N.E. 584; Williams, Admr., v. Black, 42 Ohio App. 423, 182 N.E. 351.
We cannot find that any prejudicial error was committed in excluding evidence of this character.
After the conclusion of the evidence the company requested the court to give before argument certain written instructions, and excepted to the refusal of the court so to do. Among those instructions is No. 11, reading as follows: "I further charge you that the expression used in the contract `bad habits or improper conduct' in this case is not limited in its scope to immoral or dishonest habits or conduct, but includes any improper business conduct or bad business habits."
Manifestly, when these parties entered into the contract, and authorized the employer to discharge the employee in the event that from bad habits or improper conduct he should not perform his duties to the satisfaction of the employer, they meant to include, and the language does fairly include, bad business habits and improper business conduct on his part, as that was one of the essential things about which they were contracting. The record does not show that the employee was guilty of immoral habits, nor was it contended that he was so guilty, and yet the trial appears to have been conducted in part upon the theory that it was necessary to show such conduct in order to justify a discharge as being within the language quoted. It was prejudicial error to refuse to give this instruction to the jury before argument.
During the trial counsel and the court appear to have had much difficulty in determining the construction and effect of paragraph 5 of the contract, and that same difficulty has existed in the consultation room. The conclusion of the court is that the words "physical or mental disability" and "bad habits or improper conduct" on the part of the employee, as used in that paragraph, are matters of fact to be determined by the jury from the evidence, and if these matters, or any one of them, were found to exist, in whole or in part, and if by reason thereof the employee failed to perform his duties to the satisfaction of the employer, then the employee could be discharged on sixty days notice, within the terms of the contract.
In the general charge the court instructed the jury in substance that the grounds for discharge stated in paragraph 5 were exclusive, and afforded the only grounds for which the employee could be discharged. One of the basic rules of the law relating to master and servant is that an employer may properly discharge an employee who has shown himself to be incompetent, and this right to so discharge is implied in contracts of hiring. Robertson v. Wolfe, 214 Ky. 244, 283 S.W. 428, 49 A.L.R., 469, and note.
Counsel for the company insist that in the instant case there was an implied contract on the part of Gilbert that he was competent to discharge the duties which he was employed to perform, and that for a breach of such implied contract the employer would be warranted in discharging him, while counsel for Gilbert contend that he could not lawfully be discharged for any reasons except those named in the contract. It is undoubtedly true that no contract can be implied in relation to any matter specifically covered by the written terms of the contract itself, as was held in Kachelmacher v. Laird, 92 Ohio St. 324, 110 N.E. 933, Ann. Cas., 1917E, 1117. The matters stated in paragraph 5 as justifying grounds of discharge are those relating to certain specified conditions as to the employee's duties not being performed to the satisfaction of the employer, and as to those grounds of discharge sixty days notice was required to terminate the agreement. In regard to a discharge for incompetency, the parties evidently left that to the well-known principle of law that the employee must be reasonably competent to perform the services which he is employed to perform. The law is well stated in Farmers Merchants Bank of Monroe, N.C., v. Federal Reserve Bank of Richmond, Va., 262 U.S. 649, 43 S. Ct., 651, 67 L. Ed., 1157, in the following language, in 30 A.L.R., 635, proposition 4 of the syllabus: "Laws affecting either the construction, enforcement, or discharge of a contract, which subsist at the time and place of making the contract, and where it is to be performed, enter into and form a part of it as fully as if they had been expressly referred to or incorporated in its terms."
As said by the Supreme Court of Appeals of West Virginia in Franklin v. Lilly Lumber Co., 66 W. Va. 164, 167, 66 S.E. 225, in referring to a similar clause: "We do not think the parties meant, by the use of this clause, to waive the matter of plaintiff's competency to perform the services which he had undertaken; nor to insure his employment for the full term of five years, regardless of his qualifications to perform, with reasonable skill, the work which he had engaged to perform. There is always an understanding, or agreement, implied in law, that when one undertakes to perform services for another he is reasonably competent."
To illustrate, suppose a girl were employed to operate a typewriter and the contract of employment contained a clause similar to paragraph 5 in the contract involved in this case, and it developed, when she entered on her employment, that she was entirely incompetent to operate a typewriter, and did not know how to spell, capitalize, or punctuate, it would hardly be contended that she must be retained in the employment for a period of five years. Indeed, in the case before us, the trial judge, after instructing the jury that the grounds for discharge named in the contract were exclusive, also instructed them that an employee could be discharged for two other reasons, namely, an abandonment of the services by the employee, or refusal or willful failure on his part to perform the services required. The trial judge erred to the prejudice of the employer in charging the jury that the grounds named in paragraph 5 as the grounds upon which the employee could be discharged were exclusive, for if the jury found from the evidence that the employee was incompetent to perform the work which he was employed to perform that also would be a ground for discharge under the law.
It is further contended that the verdict and judgment are excessive and against the evidence as to amount. The term of employment was to extend from January 15, 1928, to January 15, 1933, and written notice of cancellation was served on the employee January 14, 1930. This action was commenced February 18, 1930, and the verdict was returned November 7, 1930, so that from the date of the verdict to the expiration of the term of employment was a period of more than two years and two months, and from the time the relation was severed was a period of substantially three years. If the employee had continued to render service under the contract until its expiration, he would have earned $15,000, according to its terms, and yet the jury, notwithstanding the fact that he rendered no service during that time, returned a verdict for the full amount of $15,000. In so doing no deduction was made for any amount which he might be able to earn elsewhere, and no deduction was made for possible sickness or death, and no allowance was even made for the fact that the employee would, by the judgment, receive the amount long before he would have received it if he had continued in the employment; that is to say, the full amount being awarded, the present worth of the same was not taken into consideration, although the average time which the amount would have run would have been substantially eighteen months. The verdict in that amount shocks the conscience and is manifestly against the weight of the evidence.
For the reasons given the judgment will be reversed and the cause remanded for a new trial.
Judgment reversed and cause remanded.
LLOYD and WILLIAMS, JJ., concur.