Withrow v. Sullivan

Citations: 221 Ark. 372; 253 S.W.2d 339; 1952 Ark. LEXIS 909Docket: 4-9943

Court: Supreme Court of Arkansas; December 15, 1952; Arkansas; State Supreme Court

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Griffin Smith, Chief Justice, addresses the legal relationship between Charles P. Sullivan and Nevil C. Withrow concerning their business dealings during 1947 and 1948. Sullivan operated under the trade name Thorough Waterproofing Company and entered into verbal contracts with Withrow, whose partnership transitioned into the Nevil C. Withrow Company in October 1948. Sullivan contended that he was to receive weekly wages based on union scales, initially proposed at $2 per hour, with an expected annual income of $10,000. This arrangement was necessitated by Withrow's concerns over payroll and capital. Although Withrow intended to formalize the agreement, he cited legal advice against a fixed commitment.

Sullivan's compensation evolved, with a second proposal suggesting weekly payments equivalent to the union scale, supplemented by 10% of the waterproofing division's gross earnings after deducting certain business expenses. Weekly payments fluctuated from $80 to $135, and Sullivan believed he had the right to examine the company’s financial records. 

A significant point of contention arose regarding a $2,500 check issued to Sullivan in August 1949, labeled as a "bonus." Sullivan claimed he was unaware of the designation and the tax deduction, while also asserting that this payment constituted full compensation for the first year, a claim he later contradicted. The entirety of Sullivan's contractual claims relies on disputed verbal agreements rather than formal written contracts.

On January 1, 1951, Sullivan reviewed a financial statement revealing losses in the waterproofing division and expressed concern over his inability to inspect the company books, which he was told were with an auditor. He attributed increased withdrawals to "cost of living increases." The professional relationship ended when Withrow informed Sullivan on February 23, 1951, that his personal promotion work was unsatisfactory, allowing him to remain until he found new employment. Sullivan did not claim further earnings post-letter. An independent audit revealed that Sullivan received $14,027.50 from March 3, 1948, to February 1, 1951, while claiming he earned $20,176.87, with $6,049.37 asserted as unpaid. The court disallowed additional wage claims but awarded him a 10% participating profit, totaling a judgment of $5,085.34. Withrow denied the existence of the contract Sullivan sought to establish, noting that Sullivan’s employment began with the sale of his waterproofing equipment to Withrow, and he was paid $2 per hour for a 40-hour workweek. Raises were implemented in response to rising living costs, affecting all workers. Sullivan's weekly payments included various job allocations, with deductions for social security and taxes noted on pay stubs. While Withrow indicated the bonus was not contractual, it was suggested as a reward for the division's success, and minutes from a directors’ meeting proposed a $2,500 bonus for Sullivan, which was later altered. The Chancellor deemed the alteration insignificant. Sullivan was paid above the union wage scale during various periods, and the discrepancy in the bonus check—initially set at $2,500 but issued for $2,125 after tax deductions—contradicts his claim of not understanding the terms.

Sullivan expected to receive $2,500 but accepted $2,125 without addressing the deduction, which is deemed unreasonable but not determinative. Sullivan, a former railway locomotive fireman earning between $350 and $450 monthly, claimed to Withrow that his waterproofing business required more than one person to operate effectively and suggested a sale. The price set by Sullivan was reportedly acceptable. There is a lack of evidence indicating that Sullivan made any demands or claims for the disputed sums at the end of the company's fiscal year on September 30. Following Withrow's refusal to honor the initial agreement, a reasonable person would have sought a more reliable form of assurance for wage payments and the promised ten percent of gross earnings, calculated on income after minor deductions. For nearly three years, Withrow's conduct aligned with standard business practices, and Sullivan did not actively pursue his claims until receiving a dismissal letter. Documentation like checks and payrolls reflected normal business operations without any indication of disputed amounts. Given that Sullivan bore the burden of proving the existence of an oral contract, the evidence did not favor him, leading to the decision to reverse and dismiss the case.