Cheyenne Mountain School Dist. No. 12 v. Thompson

• Decision Date: 01 November 1993
• Docket Number: No. 92SC573,92SC573
• Citation: 861 P.2d 711
• Parties: 86 Ed. Law Rep. 1047 CHEYENNE MOUNTAIN SCHOOL DISTRICT # 12; Charles Mobley, Individually and as a School Board member; Carol Kliner, Individually and as a School Board member; Al Kemper, Individually and as a School Board member; John Cassiani, Individually and as a School Board member; and Patrick Maggio, Individually and as a School Board member, Petitioners, v. Dr. Loren J. THOMPSON, Respondent.
• Court: Colorado Supreme Court

Page 711

861 P.2d 711

86 Ed. Law Rep. 1047

CHEYENNE MOUNTAIN SCHOOL DISTRICT # 12; Charles Mobley Individually and as a School Board member; Carol Kliner Individually and as a School Board member; Al Kemper Individually and as a School Board member; John Cassiani Individually and as a School Board member; and Patrick Maggio, Individually and as a School Board member, Petitioners, v. Dr. Loren J. THOMPSON, Respondent.

No. 92SC573.

Supreme Court of Colorado, En Banc.

Nov. 1, 1993.

Weller, Friedrich, Ward & Andrew, Edward J. Godin, Steven L. Heisdorffer, Denver, for petitioners.

Iuppa, Simons & Martin, Barney Iuppa, Colorado Springs, for respondent.

Justice VOLLACK delivered the Opinion of the Court.

We granted certiorari to decide whether the right to accrue vacation implies the right to compensation for unused vacation upon expiration of an employment contract, absent an agreement to the contrary; and whether the court of appeals erred by determining that the employment contract at issue in this case does not preclude recovery of cash compensation for vacation unused upon expiration of the contract.

Cheyenne Mountain School District No. 12 (the School District) petitioned this court to review the decision of the court of appeals awarding compensation for unused vacation time to the School District's superintendent at the expiration of his employment contract. The trial court had granted summary judgment in favor of the School District, ruling that the employment contract was not ambiguous and did not provide for payment for unused accrued vacation time. The court of appeals reversed, holding that the superintendent's contract with the School District was ambiguous, and reasoning that, absent an express agreement to the contrary, the superintendent had an implied right to the compensation. 844 P.2d 1235. We hold that the contract is ambiguous and affirm the result reached by the court of appeals, but for different reasons. ¹

I.

Dr. Loren Thompson (Thompson) was employed as the Superintendent of Schools for the Cheyenne Mountain School District. His written contract provided for a "total compensation of $62,500.00 per annum" ² and several fringe benefits, including twenty days of vacation each year. The contract required Thompson to take at least ten days of vacation each year, and he could accumulate up to sixty days from year to year. Thompson had to give the School Board thirty days' notice of his intent to take any vacation, which could not conflict with important school business.

Thompson's contract provided that the employment relationship could terminate in several ways: by expiration of the term of the employment; by discharge for cause; by agreement; by abandonment or breach by Thompson; and by termination without cause. Paragraph 17 of the contract explicitly addressed the disposition of his benefits if he were terminated without cause:

17. Termination by the BOARD. The BOARD may unilaterally terminate this agreement without cause upon payment of any compensation remaining due to SUPERINTENDENT under this agreement, provided, that said compensation shall be only that amount set forth in paragraph 3 above or as such amount may be subsequently modified by mutual written agreeement [sic] and shall not include any other benefit provided SUPERINTENDENT as a consequence of this agreement, including, among other things, fringe benefits not received as a consequence of such termination, payment of employer contributions to P.E.R.A. for the balance received, expense to professional meetings, use of a school vehicle or any other benefit which might be enjoyed or claimed by SUPERINTENDENT as a consequence of this agreement.

Although other paragraphs in the contract provided several additional ways that Thompson's employment relationship with the School District could end, only paragraph 17, the paragraph on termination without cause, addressed the disposition of Thompson's benefits on termination.

Thompson was hired initially by the School District for the period from July 1, 1985, through June 30, 1988. His contract was extended for an additional two years. In June 1989, Thompson notified the School District that he did not intend to renew his contract when it expired on June 30, 1990. On the date the contract expired, Thompson had accrued thirty-three days of unused vacation, which was valued at $9,262.44.

Thompson made several demands for payment of the $9,262.44, but the School District refused to compensate him for the unused vacation time. In January 1991, Thompson filed an action in El Paso County District Court seeking to recover the value of his unused vacation. The School District and the individual defendants ³ filed a motion to dismiss the action under C.R.C.P. 12(b)(5) maintaining that it failed to state a claim upon which relief could be granted. The defendants' motion to dismiss was accompanied by the employment contract.

Based on the pleadings and the four corners of the employment contract, the trial court concluded that the contract was not ambiguous and construed it to deny Thompson compensation for his unused vacation. The court relied on the parties' failure to provide explicitly for the additional compensation in the contract; the paragraph fixing Thompson's compensation at $62,500 annually; and paragraph 17, which would have denied fringe benefits to Thompson if he had been terminated without cause by the School Board. The trial court determined that there were no genuine issues of material fact in the case. Because it considered matters outside the pleadings, the trial court treated the defendants' motion to dismiss as a motion for summary judgment, ⁴ and granted summary judgment in their favor.

Thompson then filed a motion to alter or amend the judgment, asserting that the trial court erroneously relied on paragraph 17 in its analysis of the contract, because that paragraph would only be applicable if Thompson's employment had been terminated without cause by the School Board. In support of his motion, Thompson attached an affidavit of the attorney who drew up the contract for the School Board, who was also a member of the Board at that time. ⁵ The trial court denied the motion to alter or amend the judgment, ruling that the information contained in the affidavit was not sufficient to make the agreement ambiguous.

The court of appeals reversed the decision of the trial court and held that Thompson was entitled to receive compensation for his unused vacation time. It first determined that Thompson's employment contract was ambiguous on the issue of compensation for unused vacation. Paragraph 17, the court of appeals reasoned, only applied when the School Board terminated the superintendent's position without cause. The contract was ambiguous about the disposition of his unused vacation if he left the employ of the School District in any other manner. Absent a specific agreement to the contrary, the court of appeals concluded, an employee has an implied right to compensation for unused vacation time on termination of his or her contract. To hold otherwise, the court of appeals declared, would result in forfeitures. Forfeitures are not favored, and contractual provisions seeking to effect a forfeiture must be stated in unambiguous language. See Cooley v. Big Horn Harvestore Systems, Inc., 813 P.2d 736 (Colo.1991).

We granted certiorari to decide whether Thompson's employment contract was ambiguous as a matter of law, and to determine whether public employees, such as school superintendents, have an implied right to compensation for unused vacation time at the expiration of their employment contracts, absent an agreement to the contrary.

II.

We first address whether Thompson's employment contract is ambiguous on the issue of compensation for unused vacation time. Reviewing courts are not bound by a trial court's decision on the ambiguity of a contract, which is a question of law. Alley v. McMath, 140 Colo. 600, 346 P.2d 304 (1959). To ascertain whether certain provisions of a contract are ambiguous, "the language used therein must be examined and construed in harmony with the plain and generally accepted meaning of the words employed and by reference to all the parts and provisions of the agreement and the nature of the transaction which forms its subject matter." Christmas v. Cooley, 158 Colo. 297, 301, 406 P.2d 333, 335 (1965). A document is ambiguous "when it is reasonably susceptible to more than one meaning." Northern Ins. Co. of New York v. Ekstrom, 784 P.2d 320, 323 (Colo.1989). In deciding whether a contract is ambiguous, a court "may consider extrinsic evidence bearing upon the meaning of the written terms, such as evidence of local usage and of the circumstances surrounding the making of the contract. However, the court may not consider the parties' own extrinsic expressions of intent." KN Energy, Inc. v. Great Western Sugar Co., 698 P.2d 769, 777 (Colo.1985) (citations omitted), cert. denied, 472 U.S. 1022, 105 S.Ct. 3489, 87 L.Ed.2d 623 (1985); see also Pepcol Mfg. Co. v. Denver Union Corp., 687 P.2d 1310, 1314 n. 3 (Colo.1984) (citing 4 S. Williston, A Treatise on the Law of Contracts § 601, at 311 (W. Jaeger ed. 1961)) ("In determining whether a contract is ambiguous, the court may conditionally admit extrinsic evidence on this issue.").

Once a contract is determined to be ambiguous, its interpretation becomes an issue of fact for the trial court to decide in the same manner as other disputed factual issues. Union Rural Elec. Ass'n v. Public Utils. Comm'n, 661 P.2d 247 (Colo.1983); Pepcol Mfg. Co., 687 P.2d 1310. Only after a contract is deemed ambiguous may the trial court use...