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Chiodo v. Gen. Waterworks Corp. - 17 Utah 2d 425, 413 P.2d 891 (Sup.Ct. 1966)

Rule:

Under a contract of employment for a stated term it is to be assumed that the parties intended that the employee would conform to the usual standards expected of an employee, and that he would render honest, faithful, and loyal service in accordance with his ability. If there is a wilful and substantial failure to adhere to those standards it would be justifiable cause for the employer to discharge him.

Facts:

In 1943, plaintiff Vincent Chiodo acquired defendant Bear River Telephone Company ("Bear"). Under Chiodo's management, Bear prospered and expanded. Later, because of continued increasing demands and inadequate capital, he decided to sell. After negotiations he accepted an offer from defendant General Waterworks Corporation ("GWC"); a condition of the sale was that GWC and Bear would employ him as manager of Bear for 10 years at a salary of $ 12,000 per year. The agreement was memorialized in a letter. Three years later, Chiodo's employment was terminated. Chiodo filed a breach of contract action against GWC and Bear in Utah state court. After a bench trial, the trial found in favor of Chiodo and rendered judgment for his salary for the remaining seven years, discounted for payment in cash, in the sum of $ 81,264.99, plus $ 6,500 owing on a retirement policy. Defendants appealed.

Issue:

Did GWC meet its burden of showing justification for terminating Chiodo's employment?

Answer:

No.

Conclusion:

The state supreme court affirmed the trial court's judgment. The court ruled that, inasmuch as the parties' contract stated nothing with respect to standards of Chiodo's conduct, nor of his possible discharge, the trial court properly received evidence relating to the parties' negotiations to determine their intent with respect to those questions. The evidence militated in Chiodo's favor. As to GWC's attempt to justify Chiodo's discharge based upon misconduct—such as payroll improprieties, insubordination and disloyalty—the court ruled that although Chiodo's conduct may not have been exemplary in all respects, he had been a good manager.

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