Allen v. Highway Equipment Co.

• Decision Date: 18 February 1976
• Docket Number: No. 56989,56989
• Citation: 239 N.W.2d 135
• Parties: Gale E. ALLEN, Appellant, v. HIGHWAY EQUIPMENT COMPANY, Appellee.
• Court: Iowa Supreme Court

Page 135

239 N.W.2d 135

Gale E. ALLEN, Appellant, v. HIGHWAY EQUIPMENT COMPANY, Appellee.

No. 56989.

Supreme Court of Iowa.

Feb. 18, 1976.

James W. Crawford and Mark Belz, of Keyes & Crawford, Cedar Rapids, for appellant.

Patrick M. Roby and Robert O. Daniel of Shuttleworth & Ingersoll, Cedar Rapids, for appellee.

Heard before MOORE, C.J., and MASON, UHLENHOPP, REYNOLDSON and HARRIS, JJ.

MASON, Justice.

Plaintiff, Gale E. Allen, brought a law action seeking damages from defendant, Highway Equipment Company, on the theory defendant had breached a written contract tract of employment entered into by the parties by the termination of Allen's employment before the termination date set forth in the agreement. The matter reaches this court on Allen's appeal from an adverse ruling of the trial court on defendant's motion for declaratory judgment.

The appeal presents two questions for review: (1) whether under the terms of the contract the parties have the power individually to voluntarily terminate employment prior to the date of the contract's expiration and (2) if paragraph 7 of the contract does in fact delegate this power, does the existence of paragraph 3 (which makes the contract one of employment for a definite term) render the contract as a whole contradictory or ambiguous?

Plaintiff was hired in an 'executive and managerial' capacity by Highway Equipment Company, an Iowa corporation in Cedar Rapids. February 19, 1965, the parties entered into a contract entitled Employment Agreement, which set forth the terms and obligations of the company's employment of plaintiff. Most pertinent to the issues before the court are the following paragraphs of the contract:

'* * *

'3. The term of employment in an executive capacity under the provisions of this agreement Shall be and extend from November 1, 1964 to and including October 31, 1975.

'4. For a period of ten (10) years from and after the date the said Allen ceases to perform the services in an executive capacity as provided herein, the company hereby engages the services of the said Allen in an advisory and consultive capacity * * *.

'5. * * *

'6. * * *

'7. If during the period the said Allen is serving in an executive capacity under the terms and provisions hereof, the employment of the said Allen Shall be terminated either by the voluntary act of the said Allen or by the act of the company, except in the case of misconduct as hereinafter defined, and the said Allen is willing thereafter to render advisory and consultive services as provided in paragraph 4 hereof, then the said Allen shall be entitled to and receive monthly payments as hereinafter provided:

'* * * (then follow 11 subparagraphs setting forth a formula of increasing compensation for advisory and consultive services for each year of Allen's employment for a period of 120 months after 'such termination').

'8. * * *

'9. Notwithstanding any of the other terms and provisions hereof, it is understood and agreed by the said Allen and the Company that any payments to be made to the said Allen upon termination of employment in an executive capacity, Whether voluntary or involuntary or as the result of death, shall be subject to modification * * *.' (Emphasis supplied).

Plaintiff remainded in the company's employ until November 16, 1972, at which time he was unilaterally discharged by the company's president, C. H. Jordan. The company thereafter paid plaintiff from Jaunary 1, 1973, through July 15, 1973, some $3000.00 under paragraph 7(i) of the contract providing for Allen's availability in an 'advisory and consultive capacity.'

July 23, 1973, plaintiff filed a petition alleging the company breached the contract of employment, claiming $140,198.40 in damages. Plaintiff's claim for damages is based on an alleged loss of salary from November 16, 1972, through October 31, 1975, at $30,000 per year plus an alleged loss of right to receive payments from defendant under paragraph 7(k) of the employment agreement at the rate of $705.19 per month for a period of 120 months following termination rather than under paragraph 7(i) which provided payments of $536.87 per month for such period and an alleged loss of his right to receive a bonus in the approximate amount of $30,000. He makes no claim for compensation for services performed in his executive and managerial capacity from November 1, 1964, through November 16, 1972.

The company affirmatively alleged in its answer that the employment contract was subject to 'termination at the discretion of either party at any time prior to the termination date and that certain provisions were made therein in the event of termination by either party under certain conditions.'

October 9 the company filed a motion for a declaratory judgment, in which the district court was requested, in relevant part, to determine if the terms of the agreement as provided in paragraphs 7 and 9 allowed either party to terminate employment 'without case or without notice.' Plaintiff's resistance to this motion was based upon paragraph 3, which, it was contended, was contrary to the company's interpretation of paragraph 7 and 9. Plaintiff argued in the alternative that if the court interpreted paragraphs 7 and 9 as asserted by the company, then there was 'an obvious contradictioin or ambiguity on the face of the Agreement' between paragraph 3 and paragraphs 7 and 9. This ambiguity, it was argued, should be resolved against the drawer of the contract, defendant company.

In its ruling filed December 21, 1973, the trial court expressed the view a motion for declaratory judgment under rules 261 and 262, Rules of Civil Procedure, was not the appropriate procedure for disposition of the matter raised by defendant but that rule 105, R.C.P., was the proper method of bringing the matter to the court's attention. The court then set out paragraphs 7 and 9 of the employment agreement and concluded 'that the terms of the contract permit of paragraphs 7 and 9. Plaintiff argued by either party to it when construing the terms of the contract as a whole.' The court also decided that since the employment of plaintiff had been terminated between November 1, 1972, and October 31, 1973, defendant should pay Allen the sum of $536.87 per month 'if the plaintiff is willing to render advisory and consulting services' (paragraph 7(i) of employment agreement).

The propriety of the trial court's selection of procedure is not challenged by either party to this appeal.

The extent of the hearing held on defendant's motion referred to in the trial court's ruling is not disclosed by the record before us. Apparently, no evidence was offered either to sustain or resist the motion.

I. Plaintiff asserts paragraph 3 of the contract renders it one of employment for a definite term. In connection with this, it is argued the 'trial court made several unwarranted assumptions' in concluding paragraph 7 permitted termination at will, 'each of which (assumption) was (a) necessary step in reaching its improper conclusion.' It is first pointed out paragraph 7 is not an 'empowering clause' giving defendant express authority to terminate plaintiff's employment. Rather, it 'states the conditions necessary for plaintiff's payment as an advisor following his executive term.' Thus, the inference of 'an empowering clause to terminate from such a conditional clause, as the lower court did, constitutes unsound construction,' particularly in view of paragraph 3.

Furthermore, plaintiff contends even if such termination power may be inferred from paragraph 7, it does not imply that such an act can take place at the whim of the employer. 'Were Paragraph 7 to be interpreted as permitting the company to discharge Allen under circumstances constituting legal cause, the entire contract would be preserved * * *.'

Finally, plaintiff argues the trial court, 'by reading the terms 'without cause' and 'at will' into Paragraph 7, * * * has changed the plain and unmistakable language of Paragraph 3', and thus violated the rules of contract construction.

The company maintains that Allen, throughout division 1 of his opening brief and argument, contends the trial court interpreted paragraph 7 of the employment agreement as granting defendant the unilateral right to terminate Allen's employment at will which is in conflict with the provisions of paragraph 3 of the agreement. The company argues this was not the ruling of the trial court from which the appeal stems. In our opinion there is support for the company's position.

However, in response to the company's argument plaintiff, in his reply brief, denies he misunderstands the claim of the company or the ruling of the trial court but insists it is his position that neither he nor the company had the right to unilaterally and without cause terminate the agreement and that the issue is 'the unilateral action of the company, not whether it had a unilateral right to terminate the agreement.' Stated otherwise, as we understand plaintiff's position, he insists although he or the company had the right to terminate the employment agreement before October 31, 1975, nowhere in the agreement is there any provision which would justify an interpretation empowering either party to terminate the agreement at will and without cause.

As pointed out, the trial court determined that when the employment agreement was interpreted as a whole its terms permitted the voluntary termination thereof by either party. This right to terminate was not limited to one for cause by the court's ruling.

Defendant in its brief and argument goes on to interpret the various paragraphs in dispute to show an intent allowing either party to terminate the employment contract at any time for any reason.

When the court is asked to interpret a contract which the parties made for themselves the object is to ascertain the meaning and intention of the parties as expressed in the language used.' State v. Starzinger, 179 N.W.2d 761,...