Bilow v. Preco, Inc.

• Decision Date: 08 September 1998
• Docket Number: No. 23737,23737
• Citation: 132 Idaho 23,966 P.2d 23
• Parties: , Pens. Plan Guide (CCH) P 23947O Robert L. BILOW, Plaintiff-Respondent-Cross Appellant, v. PRECO, INC., an Idaho Corporation, Defendant-Appellant-Cross Respondent. Twin Falls, March 1998 Term
• Court: Idaho Supreme Court

Page 23

966 P.2d 23

132 Idaho 23, Pens. Plan Guide (CCH) P 23947O

Robert L. BILOW, Plaintiff-Respondent-Cross Appellant, v. PRECO, INC., an Idaho Corporation, Defendant-Appellant-Cross Respondent.

No. 23737.

Supreme Court of Idaho,

Twin Falls, March 1998 Term.

Sept. 8, 1998.

Rehearing Denied Nov. 3, 1998.

Holland & Hart and Eberle, Berlin, Kading, Turnbow & McKlveen, Boise, for appellant. Steven B. Anderson argued.

Hepworth, Lezamiz & Hohnhorst, Boise, for respondent. John C. Hohnhorst argued.

SCHROEDER, Justice.

This is an appeal from the district court's grant of summary judgment in favor of Robert Bilow (Bilow) against Preco, Inc. (Preco). The district court held that sums of deferred incentive compensation payable to Bilow pursuant to an employment contract were (1) "wages" pursuant to section 45-601(4) of the Idaho Code (I.C.), and (2) the Employment Retirement Income Security Act did not preempt Bilow's claim of treble damages. Bilow has cross-appealed the district court's denial of attorney fees.

I. BACKGROUND AND PRIOR PROCEEDINGS

In 1983 Bilow became the president of Santa Clara Plastics, a division of Preco. On August 11, 1988, he executed an employment agreement with Preco to take effect on December 31, 1988. Under the agreement Bilow received base compensation of $150,000 per year, paid weekly, and "incentive compensation" ¹ of 6.25% of Preco's monthly "pre-tax profit" as defined in the agreement. Preco paid out 20% of the 6.25% each month (or 1.25% of Preco's monthly "pre-tax profit") as a "current incentive compensation payment" for that month. The remaining 80% (or 5% of Preco's "pre-tax profit") was allocated to a deferral account. The amount Under the 1988 agreement, if Bilow had died or voluntarily terminated his employment, he would have forfeited the amount allocated to the deferral account. If Preco terminated Bilow's employment at any time in 1989, he was to receive a cash settlement equal to 150% of the balance of the deferral account, adjusted to present value at a 6% discount rate. If Preco terminated Bilow's employment on or after January 1, 1990, he was to receive a cash settlement equal to the balance of the deferral account calculated as of the date of termination and adjusted using the same discount factor. If Bilow were disabled, he was to receive 50% of the balance of the deferral account (later amended to 100%) payable monthly during the four-year deferral term.

                allocated to the deferral account was to be paid to Bilow over a rolling four-year period, with 1/48th of the account balance being paid each month, beginning in January of 1990. 2  The purpose of the incentive compensation plan was to average Bilow's income over a four-year period
                

On June 29, 1990, the parties executed an agreement entitled "Amended and Restated Employment Agreement." The relevant changes to the 1988 agreement were: (1) Bilow would forfeit the accrued amount in the deferral account if he resigned before July 1, 1995, but if he terminated his employment with Preco on or after that date he would be entitled to the full deferral account balance, paid over as if his employment had continued; (2) if Bilow died, regardless of the date, his estate would receive the amount allocated to the deferral account, paid over four years as if his employment had continued; and (3) Preco agreed not to terminate Bilow's employment before July 1, 1995, except for "extreme misconduct," but if Preco terminated Bilow's employment at any time, he was entitled to a cash settlement equal to the balance of the deferral account, calculated as of the date of termination and adjusted to present value at a 6% discount rate.

Early in 1995 the parties agreed that Bilow would leave his employment with Preco and negotiated an agreement that his resignation would be treated as occurring on July 1, 1995, which meant that he would be entitled to receive the balance accrued in the deferral account as of July 1, 1995, payable ninety days thereafter. He had the option to receive the account balance in a discounted lump sum or paid out as if his employment continued. Bilow informed Preco that he wished to receive the account balance in a lump sum.

On July 27, 1995, Preco advised Bilow that the account balance as of July 1, 1995, was $1,644,295 and stated that this amount would be paid, with some possible adjustments, on September 29, 1995. Bilow disagreed with Preco's calculation of the account balance, and the parties began an exchange of documents in an attempt to determine the proper amount of payout. On September 29, 1995, Preco informed Bilow that it would only pay him if he executed a release of all present and future claims he had against Preco. Bilow refused. Preco made no payment on September 29, 1995.

In December of 1995, Bilow requested that Preco pay him $1.5 million and that the parties then try to amicably resolve the dispute over a possible remainder due. Preco refused this offer by way of a letter in January 1996 and stated that the July 1995 figure which they had quoted was incorrect. Preco asserted that the properly calculated deferral account balance was $1,127,449 and stated that nothing would be paid to Bilow until the parties came to an agreement regarding the entire amount owed. Bilow filed suit in February 1996, seeking $2,334,778 in damages, trebled to $7,004,334, pursuant to I.C. § 45- Bilow moved for partial summary judgment, asserting that the amount due and owing him was "wages" as that term is defined in I.C. § 45-601(4), and that he was entitled to treble damages under I.C. § 45-617(4). Preco filed a cross motion for partial summary judgment, arguing that the Employee Retirement Income Security Act of 1974 (ERISA) preempted Bilow's state law claim for treble damages. Preco also contended that Bilow's claim was not one for wages. The district court granted summary judgment in favor of Bilow. Preco appeals. Bilow cross-appeals the denial of attorney fees.

617(4), plus interest and attorney fees. On August 19, 1996, Preco paid Bilow $1,733,068.71, without requiring or obtaining any form of release.

II. STANDARD OF REVIEW

This Court applies the same standard of review as that used by the district court when originally ruling on a motion for summary judgment. Avila v. Wahlquist, 126 Idaho 745, 747, 890 P.2d 331, 333 (1995); Farm Credit Bank of Spokane v. Stevenson, 125 Idaho 270, 272, 869 P.2d 1365, 1367 (1994). The Court must liberally construe the facts in the existing record in favor of the nonmoving party and draw all reasonable inferences from the record in favor of the nonmoving party. Avila, 126 Idaho at 747, 890 P.2d at 333; Bonz v. Sudweeks, 119 Idaho 539, 541, 808 P.2d 876, 878 (1991). Summary judgment is appropriate " 'if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' " McCoy v. Lyons, 120 Idaho 765, 769, 820 P.2d 360, 364 (1991) (quoting I.R.C.P. 56(c)). If there are conflicting inferences contained in the record or reasonable minds might reach different conclusions, summary judgment must be denied. Bonz, 119 Idaho at 541, 808 P.2d at 878.

III.

THE DISTRICT COURT DID NOT ERR IN REFUSING TO CONSIDER EXTRINSIC EVIDENCE IN ORDER TO CLARIFY THE INTENT OF THE PARTIES.

Preco contends that the district court should have considered the following extrinsic evidence to determine the intent of the parties to the agreements: (1) a letter from Bilow to his divorce attorney which explained his employment agreement with Preco, (2) the affidavit of Preco's chief financial officer, Anthony Oliveri, which explained how the incentive compensation was calculated, and (3) the affidavit of Mark Peterson, a member of the Board of Directors at Preco describing the discussions and negotiations between Bilow and Preco which occurred prior to the formation of the 1988 agreement.

A. The Bilow Letter and the Affidavit of Anthony Oliveri

The court's objective in constructing a contract is to ascertain and give effect to the intent of the parties. George v. University of Idaho, 121 Idaho 30, 35, 822 P.2d 549, 554 (Ct.App.1991). "If the contract is clear and unambiguous, the court gives effect to the language employed according to its ordinary meaning." Dille v. Doerr Distributing Co., 125 Idaho 123, 125, 867 P.2d 997, 999 (Ct.App.1993). In construing unambiguous terms of a contract, the court ascertains the parties' intent from the language contained in the contract. George, 121 Idaho at 35, 822 P.2d at 554. If the contract is ambiguous, extrinsic evidence may be considered to discern the true intent of the parties. Dille, 125 Idaho at 125, 867 P.2d at 999; International Eng'g Co. v. Daum Indus., Inc., 102 Idaho 363, 365, 630 P.2d 155, 157 (1981). Therefore, unless the employment agreement is ambiguous, it is improper to consider extrinsic evidence.

"Whether a contract is ambiguous is a question of law, and this court is not bound by the decision of the trial court, but is free to draw its own conclusions from the evidence." Dille, 125 Idaho at 125, 867 P.2d at 999 (citing Clark v. St. Paul Property & Liab. Ins. Cos., 102 Idaho 756, 757, 639 P.2d 454, 455 (1981)). " 'A contract is ambiguous As to the affidavit there is one point that we need to clear up on the parol evidence rule. Our position and what was stated in the response to the motion to strike where they said Preco had not agreed that the contract is ambiguous. Unfortunately, that's a typo. What we meant to say is they have not argued that the agreement is ambiguous. If you take it in context that is what we're saying, because we think the contract is clear. And we've argued that all along....

if it is reasonably subject to conflicting interpretations.' " Dille, 125 Idaho at 126, 867 P.2d at 1000 (quoting Murr v. Selag Corp., 113 Idaho 773, 781, 747 P.2d 1302, 1310 (Ct.App.1987...