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KASSAB v. RAGNAR BENSON

May 27, 1966

Jacob G. KASSAB
v.
RAGNAR BENSON, INC.



The opinion of the court was delivered by: WEBER

 This diversity contract case heard by the Court without a jury represents the other side of the coin from that reported in Ragnar Benson, Inc., v. Kassab, et al., 325 F.2d 591 (3rd Cir., 1963). There it was determined that Ragnar Benson, Inc., was entitled to recover damages from Kassab for his breach of fiduciary duty in appropriating to himself a contract opportunity that his duty required be offered to his employer.

 Here, Jacob Kassab, as plaintiff, sues Ragnar Benson, Inc., to recover monies allegedly due him for his services in 1958, the year in which the above-mentioned cause of action arose. Kassab alleges that after several years of employment by Ragnar Benson at a stated salary, in about 1953, he was made a Vice-President of Ragnar Benson, Inc., in charge of the Pittsburgh Office under an oral agreement that he would be paid a monthly salary of $1,000 and a bonus of approximately $100,000 at the end of each year. For the years from 1954 through 1957, his total remuneration from Ragnar Benson, Inc., as shown by his employees W-2 income tax form were as follows: 1954 - $109,100; 1955 - $109,100; 1956 - $75,000, plus a bonus of $25,000 (to recompense Kassab for a donation of $25,000 made to the University of Pittsburgh); 1957 - $69,100.

 The testimony established that the determination of the amount of the bonus rested entirely in the President of Ragnar Benson, Inc. Up to 1956, the President was Mr. Ragnar Benson, who became Chairman of the Board after 1956 when his son Raymond Benson became President. Their testimony established that in determining the amount of the bonus they would consider what the person had contributed, how hard he had tried, the longevity of service, the company's earnings and the loyalty of the employees. The amount of the bonus was determined on December 31st of each year, was credited to the employee, and was actually paid during the following year.

 In the year 1958, plaintiff received his regular monthly salary of approximately $1,000 per month. On November 8, 1958, plaintiff submitted his letter of resignation to Ragnar Benson, Inc, confirming a prior verbal communication to Mr. Raymond Benson, the President of the corporation. This action occurred at about the same time that Kassab was securing for himself or his own corporation the contract which formed the basis of the action of Ragnar Benson against Kassab for breach of fiduciary duty. Kassab received a total renumeration of $12,750 from Ragnar Benson, Inc., for the year 1958, but received no bonus. On January 2, 1959, Kassab's own corporation passed a resolution to pay him $100,000 for his efforts in securing the contract opportunity for it and in reimbursement of his deprived bonus which he had to forego due to his resignation in the year 1958. Subsequently, in May 1959, Kassab agreed that in the event he should receive his bonus earnings from his former employer Ragnar Benson, Inc., which were denied him during the year 1958, he would repay to his corporation the amount received from Ragnar Benson, Inc., but not to exceed the $100,000 bonus awarded him.

 Plaintiff bases his claim in part upon the contention that the bonus for any given year was based upon profits from sales and contracts made in years prior to the year in which the profit was determined, and therefore was compensation due him for his efforts in years prior to 1958, the year of the breach of fiduciary duty. The testimony showed, however, that any bonus was computed on the basis of profits realized in the year the bonus was granted. Plaintiff produced no evidence to show that there was any other basis for computing the bonus, nor any evidence to show what the amount of the bonus should be. Plaintiff also introduced evidence to show that subsequent to the submission of his resignation in November 1958, while efforts were being made to persuade him to reconsider, he was informed by both Mr. Raymond Benson, President of the corporation, and by Mr. Ragnar Benson, Chairman of the Board, that his resignation would have no effect on his bonus. However, it was not shown that these statements, if made, were made before the officers of Ragnar Benson, Inc., became fully aware of Kassab's breach of trust which had occurred during his employment by Ragnar Benson during the year 1958.

 Our first concern must be to determine the nature of the employment contract between Kassab and Ragnar Benson, Inc. Kassab was under no obligation to remain in the employ of Ragnar Benson, Inc., for any definite period of time. He tendered his resignation early in November of 1958, and despite the efforts of the officers of Ragnar Benson, Inc., to persuade him to remain, it was never asserted that there was any obligation which bound Kassab to remain in the service of Ragnar Benson, Inc. To this extent any obligation to pay a bonus would be unenforceable for the lack of mutuality of obligation.

 
"A promise to pay an employee a bonus at the end of the year which does not obligate the employee to do or forego doing something that he was not otherwise obligated to do or forego is a mere gratuity." Judd v. Wasie, 211 F.2d 826, at p. 832 (8th Cir., 1954).

 Plaintiff faces the obligation of proving his contract in clear and precise terms. There was no agreed rate of bonus established here. While plaintiff testified that it was to be about $100,000 per year, he admitted that the amount was subject to a determination of profit by the company, and that in any event it was subject to the final discretion of Mr. Ragnar Benson, while he was President, and subsequently Mr. Raymond Benson. In fact, only in the years 1954 and 1955, did his total compensation from Ragnar Benson, Inc., exceed $100,000. The total for 1956 was $75,100 and for 1957 $69,100. Mr. Ragnar Benson denied that there was any agreement to pay any employee or to pay any fixed amount, and strongly asserted that the determination to pay a bonus in any year was entirely within his discretion and determined after a consideration of the year's results at the end of the year.

 One of the elements required to prove the existence of a binding contract is that the rate of compensation be clearly established.

 "In any employment contract if the rate of pay is uncertain it will not be enforced. Smith v. Crum Lynne Iron and Steel Co., 208 Pa. 462, 57 A. 953; Machen v. Budd Wheel Co., 294 Pa. 69, 143 A. 482." Seiss v. McClintic-Marshall Corp., 324 Pa. 201, at p. 205, 188 A. 109, at p. 110 (1936).

 But ultimately plaintiff must fail on his own admissions in the testimony here. Plaintiff and the officers of defendant corporation were in complete agreement on the fact that the ultimate decision as to any bonus was solely for the President of the corporation. It required his agreement to set a bonus at any figure and at the time of Mr. Kassab's departure from the firm no such determination had been made. The evidence showed that such determination was regularly made on the last day of the calendar year after a consideration of the factors of profits made, and the employee's diligence, application, and loyalty. When the time arrived in 1958 for the determination of this bonus, Mr. Kassab was no longer an employee and had been guilty of a disloyal act.

 The testimony clearly established that the bonus granted by the defendant company was always determined on the last day of the year. To the extent that plaintiff's evidence tended to establish any right to such compensation, it was not established that any such right was vested in him until the date of determination. A large body of cases throughout the country has established that even where a definite bonus or profit-sharing plan has been established, and forms part of the employment contract, the employee is not entitled to share in the proceeds where he leaves the employment voluntarily. See Annotation 81 A.L.R.2d 1063 "Rights and Liabilities as between Employer ...


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