In Re Industrial Car Manufacturing Co.

1 B.R. 339, 1979 Bankr. LEXIS 728
CourtUnited States Bankruptcy Court, E.D. Pennsylvania
DecidedNovember 28, 1979
Docket19-11596
StatusPublished
Cited by6 cases

This text of 1 B.R. 339 (In Re Industrial Car Manufacturing Co.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Industrial Car Manufacturing Co., 1 B.R. 339, 1979 Bankr. LEXIS 728 (Pa. 1979).

Opinion

OPINION

EMIL F. GOLDHABER, Bankruptcy Judge:

The issue before us arises out of the debtor’s objections to claims for commissions and vacation pay filed by one Nicholas Guilbert (“Guilbert”), pursuant to an employment contract between Guilbert and the debtor. Guilbert’s first claim (No. 48), is for $24,443.75, consisting of $480.75 vacation pay and $23,963.00 for commissions due on certain sale orders. His second claim (No. 49), is for a $5,500.00 administrative expense, pursuant to Section 64(a)(1) of the Bankruptcy Act. The latter claim is for commissions on a contract with Chemico Air Pollution Control Company. Guilbert claims that this amount is entitled to priority as an administrative expense because of his efforts in negotiating a compromise agreement with Chemico after the Chapter XI proceedings commenced. We will hold that Guilbert is entitled to have both claims allowed as general unsecured claims in the total amount of $23,003.75.

Easton Car Corporation (“the debtor”) designs and manufactures specialized material handling cars. In August of 1973, Guil-bert was hired as the debtor’s sales manager. The terms of his employment agreement were set forth in a letter to Guilbert dated August 23, 1976, which provided that he was to receive an annual salary of $25,-000.00, certain fringe benefits, and commission as provided in an attached memorandum. The memorandum provided:

Effective January 1, 1975 and thereafter, the following Sales Commission Policy is in effect:
1.On all first-time orders, either single units or multiples; either a new customer’s first order or a new product to a new or old customer.2%
2.On all second-time orders for essentially the same item as previously purchased by the customer.1%
3.For all orders after the second order for essentially the same item as purchased the first and second time .V2%
The appropriate percentage will be applied to the total sales price and will be paid at time of shipment.
The intermediate percentage (1%) ree-ognizes that less sales effort is usually required on a repeat order. Examples— the recent MACK-PACK order and the pending U.S. Metals order.
The minimum percentage Qh%) provides the incentive to perform the administrative functions with the customer to keep matters flowing monthly. A good example here is the wheel and rim business with MACK.
As has been the policy in the past, advances can be made prior to shipment if desired by the sales person responsible for getting the order.

On May 2, 1978, the debtor filed a petition for an arrangement under Chapter XI of the Bankruptcy Act.

I.

Claim 48 is for commissions on twenty-six first-time orders, nine second-time orders and an unspecified number of third-time orders, along with vacation pay. The commissions due for the second-time orders are admitted by the debtor. The present controversy involves nine of the first-time orders, all. of the third-time orders and the vacation pay. Easton claims that no commission is due on the following first-time orders:

1. ITT Grinnell Corporation job Nos. 76U122, 76U126 and 76U128, for which commissions of $460.00 are claimed.
2. Chemico Air Pollution Control Co. job No. 77U20, for which a commission of $2,262.00 is claimed.
*343 3. CF & I Steel Corporation job No. 77U87, for which a commission of $3,673.56 is claimed.
4. Danieli of America Corporation job Nos. 76U45, 76U171 on which a commission of $533.54 is claimed.
5. Weirton Steel Corporation job No. 77U137, for which a commission of $4,500 is claimed.
6. St. Regis Paper Company job No. 78U118, for which a commission of $327.90 is claimed.
7. Foster-Wheeler Energy Corporation job No. 78U30, for which a commission of $873.50 is claimed.
8. Mack Truck, Inc. job No. 78U48, for which a commission of $1,016.68 is claimed; and
9. Dravo Corporation, no job number, for which a commission of $6,940.00 is claimed.

The debtor first contends that the original employment contract as evidenced by the letter of August 23, 1973, was modified and superceded by an oral agreement between Guilbert and Leon Kopyt, the debt- or’s president. By the terms of the alleged modification agreement, the amount of commission due on a given contract would vary, depending upon the amount of general and administrative expenses and profit realized and the risks involved. The debtor contends that Kopyt’s decision as to whether any commission was due and in what amount was to be final.

Under Pennsylvania law, written contracts may be modified by subsequent oral agreement provided consideration is present. Stoner v. Sley System Garages, 353 Pa. 532, 46 A.2d 172 (1946). The burden of proving the modification is upon the party asserting it. M.S. Jacobs & Associates v. Duffley, 452 Pa. 143, 303 A.2d 921 (1973). The debtor’s evidence in support of its contention consists of the testimony of Kopyt that Guilbert had agreed to the modification and had accepted reduced commissions on several orders. While Guilbert conceded that he had discussed some commissions with Kopyt on several orders, he did not acknowledge that the original agreement was modified thereby. We agree.

An oral contract modifying a prior written agreement must be proved by evidence which is clear, precise and convincing. Pellegrene v. Luther, 403 Pa. 212, 169 A.2d 298 (1961). From the evidence presented, we are unable to conclude that the parties intended to modify the original agreement. Of the twenty-six claims for commissions on first-time orders, fourteen are uncontested. In light of the fact that there were no profitable contracts during Kopyt’s term as the debtor’s president, this is certainly inconsistent with a modification agreement whereby the amount of commissions due, if any, depended upon the contract’s profitability. The fact that Guilbert, himself,, provided for commission of less than two percent in the cost estimate sheets for certain first-time orders is not of consequence. This fact only indicates that a reduced commission was contemplated for certain orders. It does not establish that an agreement existed whereby the commission could be reduced on any order without Guilbert’s prior consent.

We also note that a contract of that nature, even if proven, would be unenforceable. The rate of compensation must be clearly established before an employment contract can be enforced. Kassab v. Ragnar Benson, Inc., 254 F.Supp. 830 (W.D. Pa., 1966).

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Bluebook (online)
1 B.R. 339, 1979 Bankr. LEXIS 728, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-industrial-car-manufacturing-co-paeb-1979.