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DUSESOI v. UNITED REF. CO.

June 9, 1982

Edmond J. DuSESOI, Plaintiff,
v.
UNITED REFINING COMPANY, a Pennsylvania corporation, and Harry A. Logan, Jr., an individual, Defendants



The opinion of the court was delivered by: WEBER

In January of 1981 the plaintiff in this action, Edmond J. DuSesoi, was employed as the Vice-President of United Refining International, a wholly-owned subsidiary of United Refining Company. One month later DuSesoi was unemployed, his position with International having been terminated effective January 31, 1981 because of a corporate take-over of United. It is this abrupt change in Mr. DuSesoi's employment status which forms the basis of this lawsuit.

 On May 5, 1981, DuSesoi filed a five count complaint in this court. In this complaint DuSesoi named United Refining Company and its President, Harry Logan, as defendants. The complaint alleged that United breached a written three year employment contract with the plaintiff (Count I); that United breached a three year oral employment contract (Count II); that Logan breached his warranty of authority to contract on behalf of United (Count III); that United and Logan fraudulently misrepresented the terms of the plaintiff's employment contract (Count IV); and that Logan tortiously interfered with the plaintiff's employment relationship (Count V). Presently this case is before us on defendants' motion for summary judgment. In this motion the defendants raise six separate contentions, each of which is directed to one or more counts of plaintiff's complaint. First, the defendants allege that any contract the plaintiff had was with United Refining International (International) and not with United Refining Company (United). Since International and United are separate corporate entities defendants urge us to dismiss all of the plaintiff's breach of contract claims against United. Second, defendants contend that the written contract between the parties was one of indefinite duration and, as such, terminable at will. Third, defendants argue that any oral agreement between the parties is unenforceable under the applicable statute of frauds. Fourth, defendants assert that Logan did not breach any warranty of authority during his negotiations with DuSesoi. Fifth, defendants contend that, as a matter of law, the statements made to DuSesoi do not constitute fraudulent misrepresentations. Sixth, the defendants argue that Logan, as President of United Refining Company, was privileged in any action he took with respect to DuSesoi's employment with United. Some of these questions involve solely matters of law, some require the consideration of factual matters where our function is to determine the existence of a dispute as to a genuine issue of material fact. The parties have filed affidavits and documents sufficient under the standards of Fed.R.Civ.P. 56 on the issues of fact. The legal contentions have been fully briefed by both parties and are, therefore, now ripe for our disposition.

 I. FACTS

 The business dealings which ultimately led to this lawsuit began in January of 1980, approximately one year prior to DuSesoi's discharge. At that time the plaintiff was living in Kansas City, Missouri, where he was employed as a Senior Vice-President for Hudson Refining Company. In January or February of 1980, DuSesoi was approached regarding the possibility of employment with the United Refining Company.

 At this time United was engaged in efforts to develop a crude oil trading capacity in Houston, Texas. As part of its plans United, through its President Logan, began negotiations with DuSesoi. These negotiations were aimed at securing DuSesoi's employment as head of this crude oil trading operation.

 Logan and DuSesoi met four times between February and June of 1980 to negotiate an employment contract. These meetings were held in Chicago, New York City, New Orleans and Warren, Pennsylvania.

 At these meetings a principal point for discussion was the plaintiff's salary demand. Ultimately Logan and DuSesoi agreed upon an annual salary of $ 85,000. Because this salary exceeded the salary scale paid by United to its employees it was agreed that DuSesoi would not work directly for United. Rather DuSesoi would be employed by United Refining International, a wholly-owned subsidiary of United Refining.

 On June 25, 1980, Logan wrote to DuSesoi confirming the terms of the agreement reached by the parties. In this letter Logan explained that DuSesoi would be employed through International; outlined DuSesoi's duties; and described the salary and benefits to which he would be entitled. The letter was silent with respect to the term of DuSesoi's employment.

 Two weeks later, on July 11, 1980, DuSesoi responded by letter to this communication from Logan. In his letter DuSesoi indicated that he intended to accept Logan's offer of employment with United Refining International. DuSesoi stated, however, that "several topics in (Logan's) letter ... seemed to require clarification." Included among these topics was the proposed term of DuSesoi's employment. With respect to this topic DuSesoi noted that the parties "had talked of three years and severance of one year." DuSesoi pointed out that the June 25th letter from Logan was "silent on this subject." Four days later, on July 15, 1980, Logan responded to this letter from DuSesoi. In his letter Logan indicated that he was pleased that the plaintiff had decided to accept employment with United Refining International. Logan went on to point out that "your letter also indicates that there may be some misunderstandings between us. It was my intention that you would receive a salary commensurate with the responsibilities of this subsidiary and also to participate in such other employment benefits as are granted to executive employees of the parent company. An employment contract with a severance agreement goes beyond this. You may wish to discuss this and other matters with me and I am available during regular business hours to do so."

 DuSesoi subsequently accepted this position when United Refining International moved from Kansas City to Houston and in August of 1980 began work.

 In the latter part of 1980, United Refining was acquired by Coral Energy, Inc., a subsidiary of Coral Petroleum, Inc. Coral already maintained a large crude oil trading department in Houston, Texas. Because Coral already had an established crude oil trading department the services previously provided for United by International were no longer needed. Therefore, on December 29, 1980 Logan instructed DuSesoi to terminate all of International's operations in Houston. Shortly thereafter DuSesoi was informed that his services were no longer required by United or International. This lawsuit followed.

 II. DISCUSSION

 As we have previously noted the plaintiff in this case has filed a multi-count complaint. This has evoked a response from the defendants in the form of a multi-faceted motion for summary judgment. This motion raises six separate defenses; each of which attacks one or more of the plaintiff's claims.

 The parties have briefed this motion extensively, devoting particular attention to the choice-of-law problems presented by the business dealings of DuSesoi and Logan. For its part the plaintiff attempts to use these choice-of-law considerations as a shield, arguing that uncertainty as to the applicable law precludes summary judgment at this time. We believe that the plaintiff's reliance on this issue as a bar to summary judgment is misplaced. On most of the issues raised by the defendants' motion the law of the relevant jurisdictions is essentially the same. *fn1" Therefore, as to these issues the question of choice-of-law presents little difficulty. Moreover where there are significant differences in state law we feel that the record is sufficiently developed to enable us to determine which jurisdiction's law applies. Therefore, we would reject the plaintiff's contention that uncertainty regarding the applicable law completely precludes consideration of this motion. Accordingly, we will proceed with a consideration of the individual defenses presented by that motion.

 The first defense raised in this motion addresses counts I and II of the plaintiff's complaint. In these counts asserted against Defendant United the plaintiff alleges that his termination after only five months violated written and oral three year employment contracts. In their motion for summary judgment the defendants point out that the plaintiff's employment agreement was with International and not United. Since United is not a party to this employment contract, defendants argue that they cannot be held liable for any alleged breach of this agreement.

 The plaintiff has responded by conceding that his nominal employer was International and not United. The plaintiff asserts, however, that this arrangement was made solely to conceal the plaintiff's salary from United's payroll department. The plaintiff also states that he understood that he was working directly for United and that his job was in no way dependent upon the continuing existence of International as a separate entity. (Affidavit of Edmond DuSesoi, paragraph 24). According to the plaintiff International was used simply "as a style for United to do business in Houston." Therefore, plaintiff urges that we disregard the corporate form of International and hold United directly responsible for the contractual defaults of its wholly-owned subsidiary.

 The power of a court to "pierce the corporate veil" and hold a parent company liable for the contractual defaults of its subsidiary is clearly recognized in both Pennsylvania and Texas law. Ashley v. Ashley, 482 Pa. 228, 393 A.2d 637 (1978); Sams v. Redevelopment Authority of New Kensington, 431 Pa. 240, 244 A.2d 779 (1968); Bell Oil & Gas Co. v. Allied Chemical Corp., 431 S.W.2d 336 (Tex.1968). It is conceded, however, that the validity of a corporate entity should not be lightly disregarded. Therefore any consideration of a request to pierce the corporate veil begins with the premise that "the corporate entity should be recognized and upheld unless specific, unusual circumstances call for an exception." Zubik v. Zubik, 384 F.2d 267, 273 (3d Cir. 1967), cert. denied 390 U.S. 988, 88 S. Ct. 1183, 19 L. Ed. 2d 1291 (1968). Thus, under Pennsylvania and Texas law, a corporate entity is disregarded only when that entity is used to defeat public convenience, justify wrong, protect fraud or defend crime. See, Sams v. Redevelopment Authority of New Kensington; supra; State v. Swift & Co., 187 S.W.2d 127 (Tex.Civ.App.1945).

 In this case we see little to justify holding United directly liable for the alleged contractual defaults of its subsidiary, International. The evidentiary materials submitted in support of the defendants' motion indicate that United and International took care to observe all corporate formalities. International had its own Board of Directors and held separate Board meetings. International maintained its own set of books; paid its creditors and employees; entered into contracts in its own name; and generally held itself out as a separate legal entity. (Affidavit of Harry Logan, PP 1, 2; Supplemental Affidavit of Harry Logan).

 Moreover, the plaintiff, a knowledgeable businessman, contracted with International with full awareness that it was a separate corporation. In fact, at the time he entered into this agreement DuSesoi derived a direct financial benefit from employment with this subsidiary. By accepting a position with International, DuSesoi was able to receive a salary considerably in excess of that paid by United to comparably placed officers in its organization. Moreover, by plaintiff's own admission the express purpose behind his employment with International was to "mask" his salary from United's employees. (Affidavit of Edmond DuSesoi, PP 12, 13; Affidavit of Harry Logan). In short, this is not a case where a parent corporation abuses the corporate form of its subsidiary to the prejudice of innocent third parties. Rather in this case two knowledgeable parties in the course of arm's length negotiations agreed to contract through a subsidiary for their mutual benefit. In such a case we doubt that the unusual equitable relief of piercing the corporate veil is appropriate.

 However, even if we decided that the plaintiff could in some way demonstrate equities sufficient to justify disregarding the corporate form of International, we still would dismiss the breach of contract claims pending in this case. We would take this action because we believe that these counts of the plaintiff's complaint are fatally deficient in several respects, as set forth below.

 Count I of DuSesoi's complaint alleges that United violated the terms of a written three year employment contract with the plaintiff. According to the plaintiff this written contract is embodied in three letters exchanged by Logan and DuSesoi in June and July of 1980. (Paragraph 17 of Plaintiff's Complaint). In their motion the defendants now argue that this count of the plaintiff's complaint should be dismissed because the written agreement evidenced by these letters is indefinite in duration and, as such, is terminable at will.

 At the outset the plaintiff seeks to escape summary judgment dismissal by arguing that it is unclear whether Texas or Pennsylvania law applies to this count of his complaint. We do not feel that this argument bars consideration of defendant's motion for summary judgment.

 In this instance the choice of law question presents little difficulty. Both Pennsylvania and Texas law recognizes that "where the meaning of a contract is clear and unambiguous its interpretation and construction are for the court, not the jury." Hewes v. McWilliamson, 412 Pa. 270, 194 A.2d 339 (1963); See, e.g., National Products Co. Inc. v. Atlas Financial Corp., 238 Pa.Super. 152, 364 A.2d 730 (1975); Caviness Packing Co. Inc. v. Corbett, 587 S.W.2d 543, 546 (Tex.Civ.App.1979); City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex.1968); ("it is elementary that if there is no ambiguity the construction of the written instrument is a question of law for the court.") Moreover case law in both states acknowledges that a written employment contract that is indefinite as to the term of employment is terminable at will by either party. Fawcett v. Monongahela Railroad Co., 391 Pa. 134, 137 A.2d 768, 771 (1958); In re Hand Est., 349 Pa. 111, 36 A.2d 485 (1944); Baker v. Lockheed Aircraft Service Co., 584 S.W.2d 369, 372 (Tex.Civ.App.1979). Therefore the controlling legal principles governing our consideration of this matter are the same regardless of which jurisdiction's law applies.

 In this case we feel that the written agreement of the parties, as embodied in the correspondence of DuSesoi and Logan, is unambiguous. In his June 25th letter, Logan describes in detail the proposed terms of DuSesoi's employment. (Exhibit A to Plaintiff's Complaint). This letter pointedly makes no reference to a three year term of employment. *fn2" On July 11, 1980 DuSesoi wrote to Logan seeking clarification of this very point. (Exhibit B to Plaintiff's Complaint). Logan's response, dated July 15, 1980, unequivocally rejects DuSesoi's proposal of a three year employment contract, stating: "It is my intention that you would receive a salary commensurate with the responsibilities of this subsidiary and also to participate in such other employment benefits as are granted to executive employees of the parent company. An employment contract with a severance agreement goes beyond this." (Exhibit C to ...


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