CHARLES GARAVAGLIA V CENTRA INCAnnotate this Case
STATE OF MICHIGAN
COURT OF APPEALS
June 2, 1998
CENTRA, INC., CENTRAL TRANSPORT, INC.,
CENTRAL CARTAGE CO. and MANUEL J.
MOROUN a/k/a MATTIE MOROUN,
Oakland Circuit Court
LC No. 95-500491CK
Before: Hood, P.J., and MacKenzie and Doctoroff, JJ.
Plaintiff sued defendants, claiming breach of an agreement to provide consulting services in the
area of labor relations. After hearing oral arguments on counter motions for summary disposition, the
trial court entered an order of judgment in favor of plaintiff, which held defendants jointly and severally
liable for two retainer fee payments. The trial court determined that defendants had legally terminated
the parties’ contract, but, under the circumstances, had failed to adequately notify plaintiff of their
intention to terminate the agreement.
Plaintiff appeals, claiming that he produced sufficient evidence to overcome the presumption that
the parties’ contract was terminable at will. Defendants cross appeal, claiming that since the contract
was terminable at will by either party at any time, no notice was required.
There is a strong presumption in Michigan that an employment contract for an indefinite duration
is terminable at the will of either party for any reason or no reason at all. Coleman-Nichols v Tixon
Corp, 203 Mich App 645, 654-655; 513 NW2d 441 (1994). “The rule is rather that where the
parties have not agreed upon the term, duration, or manner of termination of such an agreement it is
generally deemed to be terminable at the will of either party because they have not agreed otherwise.”
Lichnovsky v Ziebart Int’l Corp, 414 Mich 228, 240; 324 NW2d 732 (1982). However, the
presumption may be overcome and a just-cause employment relationship may be established, if a party
can identify a just-cause provision in the contract relating to the discharge of employees or if an
employee has a legitimate expectation to just-cause discharge in reliance on company policies.
Coleman-Nichols, supra at 654. See also Rood v General Dynamics Corp, 444 Mich 107; 507
NW2d 591 (1993).
A party claiming a contract must present sufficient proof either of a contractual provision for a definite
term or of a provision forbidding termination absent just cause. Rood, supra at 117. In Rowe v
Montgomery Ward & Co, Inc, 437 Mich 627, 652; 473 NW2d 268 (1991), the Court quoted 56
CJS, Master and Servant § 31, p 414:
Permanent employment contracts. As a general rule employment contracts which in
some form purport to provide for permanent employment, as where the agreement is for
the employee to have a permanent position or permanent employment or employment
for life, or the employee is hired to fill a “permanent vacancy,” or where the
employment is to be for as long as the master is operating, as long as the employee
desires the position, or as long as the employee satisfactorily performs his duties, are
terminable at will by either party where they are not supported by any consideration
other than the obligation of service to be performed on the one hand and wages or
salary to be paid on the other. [Emphasis added.]
Relying on the history behind Lynas v Maxwell Farms, 279 Mich 684; 273 NW 315 (1937), the
Court determined that “as long as” statements do not necessarily provide durational terms and that any
contract which seeks to provide permanent employment should be specific and definite with regard to
duration. Rowe, supra at 654. The Court distinguished between employment contracts and contracts
in general. Id. at 654.
In the instant case, plaintiff relied upon his understanding , as stated in his retention letter of July
18, 1986, that his financial arrangement would last “as long as (Moroun is) with the company.” The trial
court, in its opinion, cited a number of cases which dealt with similar open-ended durational periods and
determined that they were contracts for an indefinite duration. See Schippers v SPX Corp, 444 Mich
107,123-124, 127; 507 NW2d 591 (1993) (as long as Hy-lift has a truck, you will be the driver);
Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich 579, 611; 292 NW2d 880 (1980) (as
long as I did my job); Barber v SMH (US), Inc, 202 Mich App 366; 509 NW2d 791 (1993) (as long
as I was profitable and doing the job); and Cowdrey v A T Transport, 141 Mich App 617; 367
NW2d 433 (1985) (as long as you do your job and A T Transport is in business). However, plaintiff
argues that all the cases relied upon by the trial court were oral durational promises. According to
plaintiff, his case was clearly distinguishable because the parties placed the durational provision directly
into their written agreement. Thus, the parties overcame any policy considerations and judicial distrust
associated with giving contractual intent to oral employment arrangements. Because the durational
provision, as long as Moroun is with the company, was in writing, plaintiff asserted that the contract was
terminable only for just cause. We disagree. While the Rowe Court noted that it is easier to discern the
parties’ intention regarding the duration of their contract when they placed the provision in writing, there
is no support for plaintiff’s argument that by placing the durational provision in writing the parties
automatically created an agreement with a definite duration which was terminable only for just cause.
Rowe, supra at 655.
Based on the holding in Lichnovsky, supra, plaintiff argues that the contract had a sufficiently
definite duration and therefore, the contract was not presumptively terminable at will. In Lichnovsky,
the defendant, the licensor, granted the plaintiff, the licensee, the exclusive right to use the Ziebart
process in Genesee County. While the parties’ contract stated that it would remain in full force and
effect indefinitely, the contract could be terminated if the licensee failed to perform any of the terms or
conditions of the agreement. In effect, the parties had provided for the manner of termination.
Therefore, the Lichnovsky Court determined that despite the absence of a specific duration, the parties
had agreed to terminate the contract based on just cause. To construe the agreement as permitting
termination at will would be inconsistent with the provisions in the agreement relating to termination for
the failure to perform. Because the parties provided the manner for termination, the contract was not
terminable at will.
In the instant case, defendant Moroun may have left defendants’ company at any time. He may
have stayed with the company for twenty years or he could have left the day after the parties entered
into the agreement. Unlike Lichnovsky, the parties’ agreement did not provide for the manner of
termination. No provision stated that the contract could be terminated for cause. Because the parties
had not agreed upon the term, duration, or manner of termination, the contract was terminable at the will
of either party.
Moreover, plaintiff failed to produce sufficient evidence to overcome the presumption that the
parties’ contract was terminable at will. Plaintiff failed to offer any evidence of a provision in the
contract which stated that his discharge would be based on just cause. According to plaintiff, he
provided sufficient evidence to rebut the employment at-will presumption through the letter of
understanding and through his own affidavit. However, it is the substance of the parties’ agreement
which is relevant, not the fact that the agreement was manifested by a writing.
Plaintiff argues that the contract provided a durational term, which was a manifestation of the
parties’ intentions. According to plaintiff, the durational term was specifically negotiated by the parties
because of his concern over job security. However, oral statements of job security must be clear and
unequivocal to overcome the presumption of employment at will. Rowe, supra at 645. In the instant
case, plaintiff’s affidavit fails to detail any such conversations between the parties. Therefore, plaintiff is
unable to provide this Court with clear and unequivocal evidence of an oral statement made by any
defendant concerning termination of the agreement. Because plaintiff has failed to provide any evidence
to support the contention that his employment was only to be terminated for cause, the trial court
correctly granted summary disposition.
Next, plaintiff argues that the trial court erred in determining that the parties’ employment
agreement was an at-will contract terminable at any time by either party because the parties’
employment agreement was deemed to be valid and enforceable in a prior court proceeding. An
agreement cannot be enforceable if it is not a binding contract. According to plaintiff, a contract both
terminable at will and enforceable cannot coexist. We disagree.
The fact that a contract is terminable at will relates to the circumstances under which the parties
may terminate future performance under the agreement. However, termination is just one of the terms
contained in the employment arrangement. The remaining provisions in a party’s contract are not
deemed unenforceable simply because the parties have provided for a flexible method to terminate their
contractual relationship. In the instant case, the parties established an agreement to govern their future
working relationship. The agreement provided a detailed plan of compensation. Under the agreement,
plaintiff was to remain available to handle employment relations matters for defendants in exchange for
payment of a quarterly retainer fee and payment of his hourly rate. Because the parties’ agreement was
valid and enforceable, plaintiff was entitled to compensation until the time that the contract was
terminated. The fact that a contract is terminable at will does not render the contract illusory.
Finally, plaintiff argues that the doctrine of res judicata bars defendants’ claim that the contract
was terminable at will. We disagree.
The doctrine of res judicata bars a subsequent suit between the same parties when the evidence
or essential facts remain the same. Energy Reserves, Inc v Consumers Power Co, 221 Mich App
210, 215; 561 NW2d 854 (1997); Eaton Co Bd of Co Rd Comm’rs v Schultz, 205 Mich App 371,
375; 521 NW2d 847 (1994). However, res judicata bars relitigation of claims asserted by one party
against another. Van Deventer v Michigan National Bank, 172 Mich App 456, 463-464; 432
NW2d 338 (1988). Plaintiff attempts to prohibit defendants from litigating an issue: whether the
parties’ agreement established an at-will employment relationship.
In the instant case, the parties have engaged in three different legal proceedings over the last
decade. All three lawsuits dealt with breaches of the parties’ employment agreement at three different
points in time. Therefore, the facts or evidence essential to the instant action are not identical to facts or
evidence essential in the prior actions. Moreover, defendants did not raise an at-will employment
defense in the prior actions because defendants never asserted that they had terminated the contract.
The issue in the instant case, whether the parties’ employment agreement was terminable at will, could
not have been resolved in the first two court proceedings.
Furthermore, we note that the doctrine of collateral estoppel does not apply in the instant case.
Collateral estoppel precludes relitigation of an issue in a subsequent, different cause of action between
the same parties when the prior proceeding culminated in a valid final judgment and the issue was
actually and necessarily determined in that prior proceeding. People v Gates, 434 Mich 146, 154; 452
NW2d 627, cert den 497 US 1004; 110 S Ct 3238; 111 L Ed 2d 749 (1990). Plaintiff has offered no
evidence that the issue of whether the parties’ employment agreement was terminable at will was
essential to the judgment in either prior court actions. In fact, the issue was never asserted by either
On cross-appeal, defendants argue that the trial court erred by requiring them to provide notice
to plaintiff of their intention to terminate the contract. We disagree.
Defendants correctly note that in cases of employment terminable at will, notice is not required
by either party. O’Connor v Hayes Body Corp, 258 Mich 280, 282; 242 NW 233 (1932).
However, such notice relates to the advance warning of intended action. While defendants were not
required to give advance notice of their intentions to terminate the parties’ agreement, defendants should
have notified plaintiff that the contract was terminated. However, plaintiff was not aware that
defendants terminated the contract until he filed his lawsuit.
Defendants argue that plaintiff was notified that they were terminating the agreement when they
failed to pay a quarterly retainer fee payment. Based on the parties’ history, the fact that a payment was
late was not an out of the ordinary occurrence. Plaintiff had no reason to know that defendants
terminated their agreement until he was provided an answer to his complaint in the instant lawsuit.
Furthermore, general contract principles of good faith and fair dealing required defendants to inform
plaintiff that the contract was terminated. See generally, Misco, Inc v United State Steel Corp, 784
F2d 198, 203 (CA 6, 1986). Such a requirement does not seem unduly harsh in light of the ease with
which defendants could have informed plaintiff that the contract was terminated. We find that the trial
court’s resolution of the issue was fair and reasonable under the circumstances.
/s/ Harold Hood
/s/ Barbara B. MacKenzie
/s/ Martin M. Doctoroff