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Joseph Toker Inc. v. Cohen

Decided: April 13, 1961.


Conford, Freund and Kilkenny. The opinion of the court was delivered by Freund, J.A.D.


Plaintiff, Joseph Toker, Inc., appeals from a judgment of the Union County District Court, insofar as said judgment denied it the sum of $794.29, consisting of allegedly overpaid commissions to defendant, a former employee.

Plaintiff is a wholly owned subsidiary of Cities Service Oil Co., Inc., and is engaged in the fuel oil distribution business in Elizabeth, N.J. Defendant Cohen had been Toker's general manager from the time of its formation, in 1951, until September 1959. His starting salary, in 1951, under an oral arrangement documented only by notations on Toker's employment records, was fixed at "$120 wk. 5% of op. income" before federal taxes.

In April 1957, while continuing at his post in the Toker office, Cohen was placed on the Cities Service payroll, in order that he might become eligible for the parent company's fringe benefits. His monthly salary was at this time raised to $750 plus the now standard 5% of net profits. Periodic increases elevated the base monthly figure to $840 at the time of his separation from plaintiff's employ.

The testimony indicates that in the early years of his association with Toker, Cohen would receive his percentage "commissions" on a month-to-month basis, but that during the last several years of his employment he had been paid his monthly salary plus a fixed monthly "draw" or "advance" against anticipated annual net profits. In 1959 these "advances" were in the amount of $500 per month. Under circumstances which are in sharp dispute in the record, Cohen, on September 14, 1959, gave notice of intention to depart from plaintiff's employ effective the end of the month. Defendant contends he actually left on September 18, 1959, although plaintiff asserts that he was dismissed on that date. In view of the holding below on the legal issues, and our conclusions thereon, the date of severance of employment is not material.

By September 15, 1959 defendant had received, for the year, 8 1/2 months' advances, totalling $4,250. After his departure plaintiff, in computing its income records, discovered that his 5% arrangement entitled defendant to only $3,474.16 in "commissions" for 1959, as of September 15, 1959. Suit was thereupon instituted for return of the difference, as well as for alleged excess car rental advances made to Cohen.

The trial judge determined that defendant was liable for the car rental advances in the sum of $111.45 but declined to permit recovery of the assertedly overpaid advances, on the ground that these sums "constituted part of the remuneration which Mr. Cohen became entitled to receive * * * and retain." The court considered the latter determination to be dictated by the rule of Roofing Sales Co. v. Rose , 103 N.J.L. 553 (Sup. Ct. 1927). In Rose , defendant, a salesman, was paid by plaintiff at the rate of $40 per week out of a drawing account, to be charged against commissions earned by him. Because the amount of his weekly draw was suddenly reduced by plaintiff, defendant left the latter's employ. At the time of his departure, his drawing account exceeded his commissions earned by the sum of $319.40.

The former Supreme Court upheld the dismissal of plaintiff's suit for the alleged overpayment, adopting the principle that in the absence of special agreement to the contrary, an agent who receives advances on account of commissions cannot be held personally liable for those advances in the event that his employment has ceased and the commissions earned by him do not equal the advances. The holding in Rose was followed in Veteran Realty Co. v. Marks , 9 N.J. Misc. 1207 (Sup. Ct. 1931), affirmed opinion below, 110 N.J.L. 554 (E.&A. 1933), and was restated in Summer v. Fabregas , 52 N.J. Super. 399, 403 (App. Div. 1958), wherein the exception to the rule became operative by virtue of an express contractual provision for repayment of advances.

Plaintiff urges that the instant case is distinguishable from the Rose line of holdings for several reasons. First, it is said, defendant was not a salesman but an executive, and he was not employed on a commission basis; rather, he was paid a regular salary plus a monthly draw, as adjusted and computed at the end of the year, in anticipation of his share of 5% of the net income. Thus, plaintiff argues, Cohen's drawing account constituted neither a minimum salary nor a payment in lieu of salary for work to be performed in the future. In short, Cohen was not being advanced funds against which the fruits of his own endeavors -- "commissions" -- were to be offset.

We recognize the factual difference between plaintiff's arrangement with Cohen and the status of the ordinary commission salesman. The resultant legal consequences are in our view the same, however, especially in light of the mechanics of defendant's compensation agreement as contained in the record before us. The evidence indicates quite lucidly that defendant was receiving a fixed salary and a fixed minimum draw, the latter sum in lieu of additional salary and deductible from the incentive feature of his contract -- the 5% of net income arrangement. J. Richard Lynk, office manager of Toker, who computed Cohen's compensation

during the years 1955-59, testified that "Mr. Cohen was paid the total amount of $1,340 per month for the months of January to August inclusive, 1959. These payments represented $840 salary and $500 draw against ...

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