Koopman v. City of Edgemont

• Decision Date: 24 June 2020
• Docket Number: #29105,#29120
• Parties: MICHAEL DOUGLAS KOOPMAN, Plaintiff and Appellee, v. CITY OF EDGEMONT BY MAYOR JERRY J. DRIBBLE, Defendant and Appellant.
• Court: South Dakota Supreme Court

2020 S.D. 37

MICHAEL DOUGLAS KOOPMAN, Plaintiff and Appellee, v. CITY OF EDGEMONT BY MAYOR JERRY J. DRIBBLE, Defendant and Appellant.

#29105

#29120

SUPREME COURT OF THE STATE OF SOUTH DAKOTA

CONSIDERED ON BRIEFS APRIL 20, 2020

June 24, 2020

#29105, #29120-aff in pt & rev in pt-SRJ

APPEAL FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT FALL RIVER COUNTY, SOUTH DAKOTA

THE HONORABLE JANE WIPF PFEIFLE Judge

PATRICK M. GINSBACH of

Farrell, Farrell & Ginsbach, P.C.

Hot Springs, South Dakota

Attorneys for plaintiff and

appellee.

REBECCA L. MANN of

Gunderson, Palmer, Nelson

& Ashmore, LLP

Rapid City, South Dakota

Attorneys for defendant and

appellant.

JENSEN, Justice

[¶1.] Michael Koopman filed this action, which originated in small claims court, against the City of Edgemont (City) alleging he was owed employee benefits under the City's Personnel Manual (Manual). Following a bench trial, the circuit court found that Koopman was a City employee as of December 3, 2012, but only awarded employee benefits to Koopman under the Manual after his appointment as City Engineer/Code Officer on May 6, 2014. The court entered a judgment in favor of Koopman for employee benefits, but denied Koopman's motion for attorney fees. City appeals arguing the circuit court erred in determining Koopman was a City employee and in awarding benefits beyond those provided for in a written agreement between City and Koopman. We affirm in part and reverse in part.

Facts and Procedural History

[¶2.] Koopman is a licensed engineer who retired early from employment with the State of Wyoming in 2000. Koopman's retirement agreement imposed a maximum limit on his post-retirement earnings of $1,000 per month until he turned 66 years old in March 2015.

[¶3.] Koopman moved to Edgemont in 2012, as the City was converting to a new water system. The City's mayor approached Koopman about providing consulting services for the water system as well as code enforcement duties. Koopman submitted written proposals to provide both project engineering and building code enforcement services to City at set hourly rates, but in no event was he to be paid more than $1,000 per month for his work. City and Koopman executed a written Agreement for Professional Services (Agreement) on July 13,2012 for Koopman to provide project engineering, building inspection, and code compliance services to City. The Agreement set forth the hourly rates for his services and provided for reimbursement of his travel expenses. The Agreement also recited that "[n]o other benefits are requested or are part of this agreement." Koopman immediately began providing services to City.

[¶4.] Koopman and the mayor agreed that Koopman would work a regular 35-hour schedule Monday through Friday of every other week. Koopman submitted a monthly invoice for his services which were always in the amount of $1,000, regardless of the number of hours worked. City did not withhold any taxes from Koopman's monthly payments.

[¶5.] This arrangement continued until late 2012, when Koopman asked if the City would begin issuing payroll checks to him and withholding federal income taxes, Social Security, and Medicare from his compensation. City agreed and provided Koopman the City's Personnel Manual, for which he signed an acknowledgment of receipt of the Manual. Koopman also submitted a W-4 form required of all employees for withholding payroll taxes. City began issuing payroll checks to Koopman and withholding payroll taxes in December 2012. However, Koopman continued to submit monthly invoices for payment in the amount of $1,000. Koopman was paid monthly, unlike other City employees who were paid every two weeks. Koopman continued to provide the same services to City and work the same schedule after December 2012.¹

[¶6.] When Koopman began receiving payroll checks, his paystubs showed that he was accruing vacation and sick leave, a benefit provided to eligible employees in the Manual. This continued until February 2014 when the City finance officer deleted the vacation and sick leave shown to be accruing on his paystubs. She told Koopman that he was not entitled to additional benefits under his Agreement and the accrued leave shown on his paystubs was an error. Koopman did not object to the finance officer deleting the accrued vacation and sick leave or discuss this action with any other city official.

[¶7.] On May 6, 2014, the City Council adopted a written Resolution appointing Koopman as City Engineer/Code Officer. The Resolution entitled "Agreement for Services" stated that Koopman was "to provide those services outlined in the [Agreement]." It further provided that Koopman would continue to be paid $1,000 per month. In addition, the Resolution stated that "the City agrees to provide a City cell phone, to pay for basic monthly charges and provide motel, meals, & Mileage ($.37 per mile) for travel outside of [City] with Council approval." Koopman accepted the appointment and took the oath of office. The Resolution provided that Koopman's appointment was for a period of one year, until May 5, 2015. After the appointment, Koopman continued providing the same services, working the same schedule, and submitting monthly invoices for payment ofcompensation in the amount of $1,000. Koopman's pay stubs did not show any accruing vacation, sick leave, or other benefits after his appointment.

[¶8.] In March 2015, Koopman turned 66. At this time, he asked City to pay him hourly rates for his services, rather than the capped monthly rate of $1,000. Koopman claimed that these rates were consistent with the rates already in place and reminded City that he was not receiving any additional benefits. At the May 5, 2015 City Council meeting, Koopman was not reappointed as City Engineer/Code Officer. Koopman subsequently filed for unemployment benefits asserting he was an employee of City. The Department of Labor determined Koopman was an employee of City and awarded him unemployment benefits.

[¶9.] Koopman filed a small claims action against City on April 27, 2017, seeking employee benefits under the Manual from December 2012, when he claims he became a City employee. The City petitioned to remove the case from small claims court, and the case was transferred to circuit court. City argued that Koopman was an independent contractor and therefore not eligible for benefits under the Manual. City also argued that regardless of Koopman's employment status, he was not entitled to any additional benefits outside the terms of the Agreement.

[¶10.] The circuit court held that Koopman became a City employee in December 2012 when he signed a W-4 to withhold taxes and began receiving payroll checks. However, the court determined that Koopman was not entitled to any of the benefits in the Manual until May 2014, when he was appointed as City Engineer/Code Officer. The circuit court found that from May 6, 2014 through May5, 2015, the Manual provided Koopman with the following benefits as an appointed City official: $727.20 for water bill reimbursement, $2,484 for holiday pay, $2,161.08 for vacation pay and $6,000 for health insurance, for a total judgment of $11,372.28. The court also calculated prejudgment interest on the award in the amount of $4,651.87.

[¶11.] Following the court's ruling, Koopman filed a motion for attorney fees under SDCL 60-11-24.² The circuit court denied the motion, determining that SDCL 60-11-24 only authorized attorney fees on wage claims removed for a jury trial under SDCL 15-39-59, which had been repealed. The circuit court further reasoned that the City had removed the case under SDCL 15-38-57 and the language of SDCL 60-11-24 does not specifically authorize attorney fees for a case removed under SDCL 15-38-57.

[¶12.] We address the following issues on appeal:

1. Whether Koopman was entitled to employee benefits in the Manual.

2. Whether Koopman was entitled to attorney fees under SDCL 60-11-24.

Standard of Review

[¶13.] "Findings of fact, whether based on oral or documentary evidence, may not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses." Estate ofHenderson v. Estate of Henderson, 2012 S.D. 80, ¶ 9, 823 N.W.2d 363, 366 (quoting SDCL 15-6-52(a)). "Conclusions of law are reviewed under a de novo standard, 'with no deference to the trial court's conclusions of law.'" Id. (quoting Detmers v. Costner, 2012 S.D. 35, ¶ 9, 814 N.W.2d 146, 149).

[¶14.] The "existence of a valid contract is a question of law[,]" which is reviewed de novo. Behrens v. Wedmore, 2005 S.D. 79, ¶ 20, 698 N.W.2d 555, 566 (quoting In re Estate of Neiswender, 2000 S.D. 112, ¶ 9, 616 N.W.2d 83, 86). Likewise, "the interpretation of a contract is a question of law, which is reviewed de novo." Weitzel v. Sioux Valley Heart Partners, 2006 S.D. 45, ¶ 18, 714 N.W.2d 884, 892. "If in dispute, however, the existence and terms of a contract are questions for the fact finder." Behrens, 2005 S.D. 79, ¶ 20, 698 N.W.2d at 566 (quoting Morrisette v. Harrison Int'l Corp., 486 N.W.2d 424, 427 (Minn. 1992)).

Analysis and Decision

1. Whether Koopman was entitled to employee benefits in the Manual.

[¶15.] The parties agree that Koopman initially provided services to City as an independent contractor, but disagree as to whether he later became an employee of City. City challenges the court's conclusion that Koopman became an employee when he started receiving payroll checks in December 2012, and also argues that Koopman was not entitled to any additional benefits outside the terms of the Agreement. Koopman argues that the circuit court correctly determined that he became an employee in December 2012, but should have awarded him benefits from that time rather than from the time of his appointment as a City official in May 2014.

[¶16.] SDCL 53-1-3 provides that "[a] contract is either express or implied." "An express contract exists only when the parties mutually express an intent to be bound by...