Garcia v. Middle Rio Grande Conservancy Dist.

• Decision Date: 21 May 1996
• Docket Number: No. 22790,22790
• Parties: , 11 IER Cases 1328 Adolfo GARCIA, Plaintiff-Appellant, v. MIDDLE RIO GRANDE CONSERVANCY DISTRICT and Its Board of Directors, Defendants-Appellees.
• Court: New Mexico Supreme Court

Page 7

918 P.2d 7

121 N.M. 728, 11 IER Cases 1328

Adolfo GARCIA, Plaintiff-Appellant, v. MIDDLE RIO GRANDE CONSERVANCY DISTRICT and Its Board of Directors, Defendants-Appellees.

No. 22790.

Supreme Court of New Mexico.

May 21, 1996.

[121 N.M. 730] Law Offices of E. Justin Pennington, E. Justin Pennington, Albuquerque, for Appellant.

Hatch, Allen & Shepherd, P.A., Marcia E. Lubar, Diane P. Donaghy, Albuquerque, for Appellees.

OPINION

BACA, Justice.

1. Plaintiff-Appellant Adolfo Garcia appeals an order by the district court granting summary judgment in favor of Defendants-Appellees, the Middle Rio Grande Conservancy District and its board of directors (collectively "the MRGCD"). Garcia filed suit, alleging the MRGCD breached an employment contract by demoting him from his position of Division Manager to the position of Equipment Operator, which resulted in a reduction in pay. The district court ruled that, pursuant to NMSA 1978, Section 37-1-23(A) (Repl.Pamp.1990), the MRGCD is a governmental entity afforded sovereign immunity. We address whether the district court erred in finding the MRGCD immune from a suit of this nature by determining that the Personnel Policy Statement (the Personnel Policy) does not constitute a "valid written contract" between the MRGCD and its employees. We note jurisdiction under SCRA 1986, 12-102(A)(1) (Repl.Pamp.1992) (providing Supreme Court jurisdiction over appeals from district court in cases sounding in contract), and reverse.

I.

2. In his complaint, Garcia states that the MRGCD employed him since 1975. He further states that in 1976, the MRGCD hired him as the manager of the Belen Division. In August 1990, however, the MRGCD demoted him from Division Manager to the position of Equipment Operator. This demotion resulted in a reduction in pay from $17.17 per hour to $11.25 per hour. The MRGCD General Manager did send Garcia a formal letter notifying him of his demotion. However, Garcia alleges he was not informed of any specific conduct, act, or omission attributable to him as a basis for his demotion, nor given notice of, or an opportunity to correct, any deficiencies in his conduct or performance.

3. The MRGCD has a Personnel Policy which Garcia alleges is a written contract setting forth certain rights, expectations, obligations, and other promises between the MRGCD and its employees. He also alleges that the Personnel Policy provides certain criteria which govern how and by what procedures the MRGCD may demote an employee. Garcia alleges that the MRGCD demoted him in violation of the Policy, which requires a showing of good cause and notice and opportunity to improve performance, and thereby breached the employment contract.

4. In its motion for summary judgment, the MRGCD cited Section 37-1-23(A), which provides, "Governmental entities are granted immunity from actions based on contract, except actions based on a valid written contract." (Emphasis added). Thus, under Section 37-1-23(A), a governmental entity is not immune from suit in actions based on valid written contracts. The MRGCD argued that the Personnel Policy is, at most, an implied contract and does not give rise to a "valid written contract" for purposes of Section 37-1-23(A); thus the MRGCD is immune from this suit. The district court agreed and granted summary judgment, concluding that the MRGCD is immune from suits of the type and nature as that brought by Garcia. Garcia now appeals the order granting summary judgment, contending that the Personnel Policy constitutes a written employment contract sufficient to overcome the grant of governmental immunity.

II.

5. On appeal, the MRGCD argues that the Personnel Policy does not constitute a valid written contract sufficient to overcome the grant of immunity from suits based on valid written contracts. The MRGCD argues the Personnel Policy is, instead, merely "a personnel ordinance or resolution" which is not a valid written contract as required by Section 37-1-23(A). We disagree.

6. "Summary judgment is proper if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Tabet Lumber Co. v. Romero, 117 N.M. 429, 431, 872 P.2d 847, 849 (1994). We hold that the trial court erred by granting summary judgment in favor of the MRGCD.

A.

7. In Hicks v. State, 88 N.M. 588, 592, 544 P.2d 1153, 1157 (1975), this Court abolished the common-law doctrine of sovereign immunity. See Hydro Conduit Corp. v. Kemble, 110 N.M. 173, 177, 793 P.2d 855, 859 (1990). The Court held that the decision would apply only prospectively, beginning with cases accruing on and after July 1, 1976. Id. Before the law went into effect, our Legislature reinstated sovereign immunity by enacting 1976 N.M.Laws, Chapter 58. Hydro Conduit, 110 N.M. at 177, 793 P.2d at 859. Reinstatement of immunity under Chapter 58, however, is subject to certain exceptions.

8. One exception applies to contract cases brought against governmental entities. Section 24 of Chapter 58 makes up what is now Section 37-1-23(A), the particular statute at issue in this case, which provides, "Governmental entities are granted immunity from actions based on contract, except actions based on a valid written contract." (Emphasis added). See Hydro Conduit, 110 N.M. at 177, 793 P.2d at 859. Thus, a governmental entity's contractual liability can only be based on a valid written contract.

B.

9. First, we address whether Garcia and the MRGCD entered into an employment contract. "Ordinarily, to be legally enforceable, a contract must be factually supported by an offer, an acceptance, consideration, and mutual assent." Hartbarger v. Frank Paxton Co., 115 N.M. 665, 669, 857 P.2d 776, 780 (1993), cert. denied, --- U.S. ----, 114 S.Ct. 1068, 127 L.Ed.2d 387 (1994). Indeed, the conduct of Garcia and the MRGCD indicates an offer of employment, acceptance, and consideration. That is, Garcia was offered and he accepted employment with the MRGCD in 1975, and was offered and he accepted the position of Division Manager in 1976. In each instance, he proceeded to carry out the specific tasks required of him in service of the MRGCD, and the MRGCD compensated him accordingly.

10. Nevertheless, in New Mexico an employment contract is for an indefinite period and is terminable at the will of either party unless there is a contract stating otherwise. Hartbarger, 115 N.M. at 668, 857 P.2d at 779. New Mexico recognizes two exceptions to this general rule, however: "wrongful discharge in violation of public policy (retaliatory discharge), and an implied contract term that restricts the employer's power to discharge." Id. Whether an implied employment contract exists is a question of fact, and it may be "found in written representations such as an employee handbook, in oral representations, in the conduct of the parties, or in a combination of representations and conduct." Id. at 669, 857 P.2d at 780 (emphasis added); see also Newberry v. Allied Stores, Inc., 108 N.M. 424, 427, 773 P.2d 1231, 1234 (1989) (stating that implied contract is agreement in which parties by course of conduct have shown intention to be bound by agreement).

11. We have held that an employee handbook may constitute an implied employment contract. Forrester v. Parker, 93 N.M. 781, 782, 606 P.2d 191, 192 (1980) (holding that personnel policy guide controlled employee-employer relationship and, therefore, constituted implied employment contract). We have also recognized that not all personnel manuals may give rise to an implied employment contract. Lukoski v. Sandia Indian Management Co., 106 N.M. 664, 666, 748 P.2d 507, 509 (1988) (stating that not all personnel manuals will become part of employment contracts (quoting Leikvold v. Valley View Community Hosp., 141 Ariz. 544, 548, 688 P.2d 170, 174 (1984) (en banc))). In New Mexico, "a personnel manual gives rise to an implied contract if it controlled the employer-employee relationship and an employee could reasonably expect his employer to conform to the procedures it outlines." Newberry, 108 N.M. at 427, 773 P.2d at 1234 (citing Forrester, 93 N.M. at 782, 606 P.2d at 192).

12. The MRGCD's Personnel Policy contains provisions relating to most every aspect of an employment relationship, including job description, compensation (including salary on promotion, demotion, or transfer), overtime, compensatory time, time clock violations, tardiness, sick leave and annual leave, and holidays. Significantly, Section 502 of the MRGCD's Personnel Policy provides,

An employee may be demoted or reclassified to another position and pay for which he is qualified, or have his pay in the same position reduced (a) when he would otherwise be terminated; or (b) when he does not possess the necessary qualifications to render satisfactory service in the position he holds, or is recommended for separation during probation; or (c) when he voluntarily requests such demotion or reclassification.

Additionally, the Personnel Policy includes an "Administrative Remedies" section applicable when personnel actions result in suspension, termination, or demotion. The Personnel Policy is specific so that employees may reasonably rely on its provisions and may expect that the MRGCD will conform as well.

13. Although we recognize that a personnel policy may evidence an implied employment contract, we maintain:

Employers are certainly free to issue no personnel manual at all or to issue a personnel manual that clearly and conspicuously tells their employees that the manual is not part of the employment contract.... [However,] if an employer does choose to issue a policy statement, in a manual or otherwise, and, by its language or by the employer's actions, encourages reliance thereon, the employer cannot be free to only selectively abide by it. Having announced a policy, the employer may not treat it as illusory.

Lukoski, 106 N.M. at 666-67, 748 P.2d at 509-10 (quoting Leikvold, 141 Ariz. at 548,...