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French v. Sabey Corp.

February 20, 1997


Appeal from Superior Court of Spokane County. Docket No: 92-2-04537-5. Date filed: 08/31/95. Judge signing: Hon. Kathleen O'Connor.

Rehearing Granted July 8, 1997,

Authored by John A. Schultheis. Concurring: Dennis J. Sweeney, Frank L. Kurtz.

The opinion of the court was delivered by: Schultheis

SCHULTHEIS, J. After the termination of his employment with Sabey Corporation, Alfred French sued Sabey for breach of an employment agreement and payment due on a remodeling project. The trial court granted Sabey's motion for partial summary judgment and dismissed the first claim, finding that the oral employment agreement was barred by the statute of frauds. Mr. French appeals, contending the statute of frauds is not applicable to this agreement. We affirm.

Mr. French was president and part owner of Lad Management Services, Inc. (providing management for Northtown Mall in Spokane) and Pacific Maintenance Company (providing maintenance services for Northtown). In 1988, the owners of Northtown decided to sell the mall and began negotiations with several prospective buyers, including Sabey. Mr. French worked with David Sabey to prepare the winning proposal for the purchase, and Sabey Corporation purchased the mall in January 1989.

Along with the purchase of Northtown, Sabey also bought Lad Management and Pacific Maintenance. According to Mr. French, while negotiating the purchase of the companies with David Taylor, then vice-president and chief financial officer of Sabey, Mr. French was offered a position as vice-president of Sabey's retail division. In a meeting on October 17, 1988, the two men discussed the terms of Mr. French's employment. Mr. French wrote Mr. Taylor a letter on October 24, leading with the following paragraph:

In follow up to our conversations relative to the consolidation of Lad Management Services, Inc. into the Sabey Corporation and the establishment of a retail real estate division within the Sabey Corporation, I would like to offer the following comments and proposal. After discussing the benefits of including Lad Management and Pacific Maintenance and their personnel in the purchase of the mall, Mr. French's letter proposed in particular the hiring of two current employees as well as himself. He referred to three attached exhibits as outlines for employment agreements for myself, Tom and Larry. Upon your acceptance of the proposals attached we shall enter into employment agreements and proceed to make the transfer of operations and the establishment of the operational entity desired. The three "outlines" were identical, except that Mr. French's included a higher salary.

The relevant terms of the French employment agreement attached to the letter were as follows: (1) the term of employment was for 5 years, beginning November 1, 1988; (2) the agreement could be terminated by either party with 6 months' written notice to the other party; (3) the terminated employee was entitled to 12 months of severance compensation; (4) salary of $10,000 per month; (5) the same medical and life insurance, disability, sick leave and vacation benefits as Sabey's other executive employees; and (6) costs for club memberships, professional organizations, conferences, professional license fees, automobile and car phone expenses and relocation from Spokane to Seattle. Mr. French contends Mr. Taylor agreed to the terms of employment in a meeting on October 24, 1988. Sabey, which never signed the employment proposals, disagrees.

Both parties agree that Mr. French began working for Sabey on November 1, 1988. *fn1 For 11 months, Mr. French managed Northtown and commuted between Seattle and Spokane, eventually leasing a condominium in Seattle as a second home. According to Mr. French, during this time Sabey honored every condition of the employment agreement. On October 6, 1989, a Sabey executive orally terminated Mr. French's employment as vice-president, but offered to employ him for six months as a consultant and independent contractor to perform architectural services at Northtown. Mr. French accepted the position at half his former salary and with no benefits. After a three-month written extension of this agreement, Mr. French was terminated in July 1990.

In the first claim of his suit against Sabey, Mr. French alleged breach of the employment agreement and sought recovery of the following sums: 6 months' notice of termination pay $60,000; 12 months' severance pay $120,000; relocation and housing expenses $13,725; automobile allowance $6,500; *fn2 and compensation for medical insurance during the 6-month notice period $1,500. The second claim alleged payment due for architectural services. Sabey answered, denying there was an enforceable employment agreement and asserting several counterclaims and affirmative defenses, including the statute of frauds. Sabey then moved for partial summary judgment on the employment agreement claim. After the trial court granted the motion and dismissed the first claim, Mr. French obtained an order making the partial summary judgment a final judgment and he appealed.

The principal question in this appeal is whether an oral employment contract may avoid the statute of frauds if the contract is terminable at will and has been partly performed. We hold that oral agreements for personal services may not be taken out of the statute of frauds under these circumstances.

We review an order granting summary judgment de novo, engaging in the same inquiry as the trial court. Greaves v. Medical Imaging Sys., Inc., 124 Wash. 2d 389, 392, 879 P.2d 276 (1994). Summary judgment must be affirmed if the facts and the inferences arising from them, viewed in the light most favorable to the nonmoving party, show there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id.

Neither party disputes that Mr. French and Sabey entered into an oral employment agreement. Generally, an oral contract for personal services that by its terms is not to be performed within a year must be in writing or it is barred by the statute of frauds. *fn3 RCW 19.36.010; Dudley v. Boise Cascade Corp., 76 Wash. 2d 466, 470, 457 P.2d 586 (1969). Since Mr. French's oral agreement is for a term of five years, it is barred by the statute of frauds unless it falls within one of the statute's exceptions. Greaves, 124 Wash. 2d at 396.

Mr. French first argues that the statute does not apply to this contract because his employment was terminable at will. Either party could terminate the relationship at any time, he contends; therefore, the contract could have been performed within a year. This argument is without merit. If a contract has a fixed duration period, the fact that it is terminable at will does not take it out of the operation of the statute of frauds. *fn4 Lectus, Inc. v. Rainier Nat'l Bank, 97 Wash. 2d 584, 589, 647 P.2d 1001 (1982); ...

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