Fremont Homes, Inc. v. Elmer

• Decision Date: 15 March 1999
• Docket Number: No. 97-301,97-301
• Citation: 974 P.2d 952
• Parties: 14 IER Cases 1687 FREMONT HOMES, INC., a Wyoming corporation, Appellant (Plaintiff), v. James L. ELMER, Appellee (Defendant).
• Court: Wyoming Supreme Court

Page 952

974 P.2d 952

14 IER Cases 1687

FREMONT HOMES, INC., a Wyoming corporation, Appellant (Plaintiff), v. James L. ELMER, Appellee (Defendant).

No. 97-301.

Supreme Court of Wyoming.

March 15, 1999.

David B. Hooper of Hooper Law Offices, P.C., Riverton, WY, Representing Appellant. Argument by Mr. Hooper.

Richard Mathey of Reese & Mathey, Green River, WY, Representing Appellee. Argument by Mr. Mathey.

Before LEHMAN, C.J., and MACY, GOLDEN and TAYLOR, ^* JJ., and PRICE, D.J.

LEHMAN, Chief Justice.

At issue in this case is the interpretation of an employment contract between appellee James Elmer (Elmer) and his employer, Fremont Homes, Inc. (Fremont). The district court determined that Elmer's employment contract provided Fremont's exclusive remedies against Elmer and granted Elmer's motion for summary judgment on Fremont's claims. After a bench trial, Elmer prevailed on his counterclaim for compensation due under the employment contract. Fremont appeals both rulings. Regarding Elmer's counterclaim, we find adequate evidence to support the district court's findings and thus affirm the award. Because we hold that a contract term exempting a party from tort liability for harm caused intentionally is unenforceable due to public policy considerations, we reverse the summary judgment entered in Elmer's favor and remand the case to the district court.

ISSUES

Fremont presents the following issues for our review:

I. Did the court err in finding that defendant/appellee was entitled to partial summary judgment thereby dismissing plaintiff/appellant's claims against defendant/appellee for intentional interference with a known economic advantage and breach of fiduciary duty?

II. Did the court err in finding defendant/appellee was entitled to a one-third share ($50,000) of the reserve account, required to be maintained pursuant to the contract, even though defendant/appellee's conduct disrupted plaintiff/appellant's business thereby breaching defendant/appellee's fiduciary obligation to plaintiff?

Appellee Elmer rephrases the issues in this manner:

I. A contract existed between the parties. The contract limited remedies available to the parties as against one another. Did the trial court err when it entered partial summary judgment dismissing all claims of Appellant and all claims of Appellee which were beyond the scope of the contract?

II. The contract between the parties provided for the establishment of a $150,000.00 reserve account. The contract also provided that under certain circumstances Appellee was entitled to receive payment of one-third of the reserve account. Did the trial court err when it determined that Appellee was entitled to his one-third of the account?

FACTS

Appellant, Fremont, sells manufactured homes. In March of 1995, Fremont, through its principals, Sam and Doug Stanbury, hired appellee Elmer to establish and manage a sales lot in Rock Springs. The parties executed a "Job Description and Compensation Agreement" that detailed Elmer's job duties and method of compensation. The Rock Springs lot opened in April of 1995.

Fremont and Elmer parted ways in May of 1996, when Elmer left to open his own sales lot next door to Fremont's location. All but one of Fremont's employees quit at the same time. Fremont filed suit in May of 1996, stating a number of causes of action including intentional interference with a known economic advantage ¹ and breach of fiduciary. Fremont alleged that the following conduct constituted improper interference with business and contractual relationships: (1) Elmer induced Fremont's employees to terminate their employment with Fremont and go to work for Elmer; (2) Elmer induced Fremont customers to order homes from Elmer instead of Fremont; and (3) Elmer enticed Fremont's manufacturers to cease selling their homes to Fremont and to instead sell to Elmer.

Elmer filed an answer denying Fremont's claims and asserted a counterclaim for unpaid sales commissions and other compensation under the provisions of the contract. Elmer then moved for summary judgment on Fremont's claims, arguing that the terms of the employment contract furnished Fremont's exclusive remedies against Elmer. The trial court agreed and granted Elmer's motion for summary judgment.

The case proceeded to trial on Elmer's counterclaims. The major points of contention at trial were: (1) whether a $150,000 cash reserve account had been established, and (2) if so, was Elmer entitled to a distribution from the reserve account without a vote by Elmer and the Stanburys. After a bench trial, the district court found that Fremont's profits were kept in a checking account that held over $53,000 at the end of Elmer's performance year. In addition, a $100,000 certificate of deposit had been purchased with monies from this account. Combining these two amounts, the district court found that a cash reserve account containing over $150,000 had been established.

In awarding Elmer damages, the district court determined that he was entitled to one-third ($50,000) of the reserve account without a vote for distribution. On this point, the district court reasoned that Fremont had a fiduciary obligation to hold the reserve account intact for Elmer and the two Stanburys, and that, under the contract, Elmer's share of the reserve account became vested when Elmer completed one year of service with Fremont. Altogether, the district court awarded Elmer damages totaling $60,198.90. ² Fremont timely appeals.

DISCUSSION

Limitation of Remedies Provision

The district court determined that the contract between the parties furnished Fremont's exclusive remedies and granted summary judgment in favor of Elmer on Fremont's claims for intentional interference with a known economic advantage and breach of fiduciary duty. When the interpretation of a contract is at issue, summary judgment is proper where the terms of the parties' contract do not raise issues of material fact, the contract language is plain and unambiguous, and the terms of the contract are controlling. Kirkwood v. CUNA Mut. Ins. Soc., 937 P.2d 206, 208-09 (Wyo.1997); Barlage v. Key Bank of Wyoming, 892 P.2d 124, 127 (Wyo.1995); Moncrief v. Louisiana Land & Exploration Co., 861 P.2d 516, 523 (Wyo.1993). Because the interpretation of a contract is purely a question of law, this court conducts a de novo review of the district court's conclusions. Anderson v. Bommer, 926 P.2d 959, 961 (Wyo.1996); Moncrief v. Louisiana Land & Exploration Co., 861 P.2d at 524.

In interpreting a contract, our primary concern is the true intent and understanding of the parties at the time and place the contract was made. Examination Management Servs., Inc. v. Kirschbaum, 927 P.2d 686, 690 (Wyo.1996). We consider the contract as a whole, reading each part in light of all other parts; meaning should be afforded to all the language used by the parties if that can be done and a reasonable construction achieved. In other words, we analyze the "tenor" of the contract. Id. Only when a contract is ambiguous do we acquire license to construe that document by resort to extrinsic evidence. Martin v. Farmers Ins. Exch., 894 P.2d 618, 620 (Wyo.1995). Ambiguity exists where a contract "is obscure in its meaning because of indefiniteness of expression or because it contains a double meaning." Id. (quoting Ferguson v. Reed, 822 P.2d 1287, 1289 (Wyo.1991)); see Kirkwood v. CUNA Mut. Ins. Soc., 937 P.2d at 208. Disagreement by the parties concerning the meaning of a contract term does not render the contract ambiguous. Kirkwood, 937 P.2d at 209.

With these rules of contract analysis in mind, we examine the parties' contract. Paragraph two of the employment contract provides:

(e) Remedies

(i) The remedies which Elmer has against Fremont shall be limited to those remedies which are for failure to pay past accrued wages and/or bonuses or other compensation agreed upon between the parties in writing.

(ii) The remedies which Fremont shall have against Elmer shall be limited to reimbursement for misappropriated funds or equipment or entering into agreements or making contributions or financial obligations of the business which are in excess of the scope of his authority set out herein.

We must answer two questions: (1) does this contract provision limit Fremont's remedies to those listed; and (2) if so, is the provision enforceable?

Elmer argues that paragraph 2(e)(ii) unambiguously limits Fremont's remedies to those mentioned. Elmer also argues that the limitation of remedies provision applies to claims arising under the contract as well as claims arising outside of the contract. We agree. The limitation of remedies provision explains that Fremont's remedies "shall be limited" to those listed. In addition, the remedies provision lists remedies which, although they are indirectly related to the contractual relationship between the parties, sound in tort. More specifically, we look at two of the remedies mentioned--"reimbursement for misappropriated funds or equipment"--two torts more commonly known as theft and conversion. Because the provision clearly declares that Fremont's remedies "shall be limited" and that the remedies listed include extra-contractual remedies, we agree with the district court's determination that the contract provides Fremont's exclusive remedies against Elmer. Nevertheless, we do not agree, as a matter of public policy, that this contract term is enforceable.

The question for the court is whether the limitation of remedies provision, which, in effect, exempts Elmer from liability for intentional torts, is enforceable. In Wyoming, a contract limiting liability for negligence may be enforced only if it does not contravene public policy. Schutkowski v. Carey, 725 P.2d 1057, 1059-60 (Wyo.1986); Boehm v. Cody Country Chamber of Commerce, 748 P.2d 704, 710 (Wyo.1987); Brittain v. Booth, 601 P.2d 532, 535 (Wyo.1979). Where willful and wanton misconduct is shown, an otherwise valid release is...