Sanders v. Gravel Products, Inc.

• Decision Date: 02 September 2008
• Docket Number: No. 20080001.,20080001.
• Citation: 755 N.W.2d 826,2008 ND 161
• Parties: Terry SANDERS, Plaintiff and Appellant, v. GRAVEL PRODUCTS, INC., Defendant and Appellee.
• Court: North Dakota Supreme Court

755 N.W.2d 826

2008 ND 161

Terry SANDERS, Plaintiff and Appellant, v. GRAVEL PRODUCTS, INC., Defendant and Appellee.

No. 20080001.

Supreme Court of North Dakota.

September 2, 2008.

Mark V. Larson, Larson Law Firm, P.C., Minot, ND, for plaintiff and appellant.

Lawrence E. King, Zuger Kirmis & Smith, Bismarck, ND, for defendant and appellee.

MARING, Justice.

[¶ 1] Terry Sanders appeals from an amended judgment dismissing his breach of contract and Employee Retirement Income Security Act ("ERISA") claims against Gravel Products, Inc. We conclude the district court did not err in dismissing the breach of contract action. We further conclude, however, the district court erred in granting summary judgment dismissal of Sanders' ERISA claim because genuine issues of material fact exist whether ERISA is applicable in this case. We affirm in part, reverse in part, and remand for further proceedings.

I

[¶ 2] In 1980 Sanders began working in Minot as the office manager for Gravel Products, a family-owned business that crushes, screens, and hauls gravel products for various purposes, including state and federal highway projects. Although not a member of the family that owned the business, Sanders was given increasing management and supervisory authority through the years and was eventually appointed president of the company in the early to mid 1990s. The family members involved in the business wanted to provide financial benefits for Sanders in addition to his salary, but did not want a non-family member to own company stock. The family members consulted with their accountant about devising a deferred compensation plan for Sanders.

[¶ 3] On December 18, 1996, Sanders, who was 39 years old at the time, entered into a deferred compensation agreement with Gravel Products. The agreement provided that Sanders was "an at will employee with no guarantee of employment." The agreement provided that Sanders would receive annual benefits from the company beginning at age 60 through age 75, and the amount of the benefits would increase the longer Sanders remained employed with the company. The annual benefit table set benefits at $8,500 per year if Sanders was terminated at age 41, and up to $170,000 per year if Sanders was terminated at age 60. The agreement further provided:

At the option of the Corporation or Employee, if Employee's employment is terminated on or after the Employee shall have reached the age of 41 for a reason other than death or the Company is sold or liquidated, the insurance policy purchased by Corporation to fund this plan may be assigned to Employee as full payment of all obligations created by this plan. The transfer shall be completed within 30 days of termination and Employee shall be responsible for all tax consequences.

In May 1997, Gravel Products purchased a "Flexible Premium Adjustable Variable Life Insurance Policy" naming Sanders as the insured, and began paying $14,000 annual premiums for the policy.

[¶ 4] Following an investigation of Gravel Products in 2002, the North Dakota Department of Transportation and the federal Department of Transportation informed the company that Sanders could not be further involved with Gravel Products or the company would not qualify for future state and federal funded highway contracts. Because Gravel products received a substantial portion of its revenue from highway projects, the company terminated Sanders' employment on October 30, 2003, when Sanders was 46 years old. Under the annual benefit table of the agreement, Sanders would have been eligible to receive $51,000 per year for 15 years when he turned age 60. Gravel Products decided to assign the life insurance policy to Sanders under the terms of the compensation agreement. Although the agreement required the transfer to be completed within 30 days of termination, the transfer was completed past the 30-day period because, according to the accountant for Gravel Products, Sanders specifically requested that if the company exercised its option to assign the life insurance policy to him, the assignment be delayed until 2004 for tax purposes. The transfer was completed in 2004 when the net cash surrender value of the policy was $114,072.83.

[¶ 5] Sanders sued Gravel Products for breach of contract based on the failure of Gravel Products to assign the insurance policy to him within 30 days of his termination. He also alleged a claim under ERISA, 29 U.S.C. §§ 1001-1461, that the company had failed to fully fund his retirement plan under the deferred compensation agreement. The district court ruled in a partial summary judgment that ERISA did not govern the parties' deferred compensation agreement and dismissed that claim. Following a bench trial, the court dismissed the breach of contract action. The court ruled time was not of the essence of the contract and, therefore, the failure to complete the transfer within 30 days of termination was not a breach of contract. In the alternative, the court ruled Sanders was estopped from claiming breach of contract because he had requested the delay of the transfer for tax purposes.

II

[¶ 6] Sanders argues the district court erred in dismissing his breach of contract action.

[¶ 7] A breach of contract occurs "`when there is nonperformance of a contractual duty when it is due.'" Van Sickle v. Hallmark & Assoc., Inc., 2008 ND 12, ¶ 11, 744 N.W.2d 532 (quoting Good Bird v. Twin Buttes Sch. Dist., 2007 ND 103, ¶ 9, 733 N.W.2d 601). Whether a party has breached a contract is a finding of fact that will not be reversed on appeal unless it is clearly erroneous. Silbernagel v. Silbernagel, 2007 ND 124, ¶ 19, 736 N.W.2d 441. A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, after review of the entire record, we are left with a definite and firm conviction a mistake has been made. Thompson v. Olson, 2006 ND 54, ¶ 10, 711 N.W.2d 226.

[¶ 8] The district court specifically found, "[b]ecause of tax consequences, Sanders requested . . . Gravel Products defer assigning the insurance policy to him until 2004 instead of assigning the insurance policy to him within 30 days of his termination as stated in the Agreement." The court reasoned:

There was no breach of the Agreement. . . . Gravel Products, as allowed by the Agreement, did assign the insurance policy to Sanders, and Sanders accepted the assignment. Although the insurance policy was not assigned within 30 days of Sanders' termination as set forth in the Agreement, that in and of itself does not constitute a breach for two reasons: there is no "time is of the essence" clause in the Agreement; and the deferred assignment was done at Sanders' request. As such, he is estopped from claiming Gravel Products breached the Agreement.

[¶ 9] Sanders contends the court erred in finding time was not of the essence of the agreement's option provision allowing Gravel Products to assign the insurance policy to him within 30 days of his termination, and further erred in ruling he was estopped from asserting the delay as a breach. It is unnecessary to address these issues, because assuming for purposes of argument only that time was of the essence and equitable estoppel principles do not apply, "we will not set aside a correct result merely because the district court's reasoning is incorrect if the result is the same under the correct law and reasoning." Hanson v. Boeder, 2007 ND 20, ¶ 21, 727 N.W.2d 280.

[¶ 10] A person may waive contractual rights and privileges to which that person is legally entitled. Lawrence v. Delkamp, 2006 ND 257, ¶ 8, 725 N.W.2d 211. "Waiver is a voluntary and intentional relinquishment or abandonment of a known advantage, benefit, claim, privilege, or right." Hanson v. Cincinnati Life Ins. Co., 1997 ND 230, ¶ 13, 571 N.W.2d 363. Although waiver and estoppel are similar concepts, estoppel involves conduct by both parties and prejudice is one of its essential elements, while waiver depends upon what one party intended to do, regardless of the other party. Diversified Fin. Sys., Inc. v. Binstock, 1998 ND 61, ¶ 16, 575 N.W.2d 677. "Estoppel arises apart from any intention on the part of the one estopped." Peterson Mech., Inc. v. Nereson, 466 N.W.2d 568, 571 (N.D.1991). Although the existence or absence of waiver is generally a question of fact, CAP Partners v. Cameron, 1999 ND 178, ¶ 18, 599 N.W.2d 309, the issue becomes a question of law if reasonable persons could draw only one conclusion from the circumstances. Paulson v. Paulson, 2005 ND 72, ¶ 6, 694 N.W.2d 681.

[¶ 11] The district court found that Sanders requested the delay in completing the transfer of the insurance policy for his personal tax purposes thus causing completion of the transfer to occur after the 30-day period had expired. A contract provision that time is of the essence can be waived by a party to the contract, see Nelson v. Glasoe, 231 N.W.2d 766 Syll. 3 (N.D.1975), and option conditions in a contract may also be waived. See Stuart v. Stammen, 1999 ND 38, ¶¶ 12-13, 590 N.W.2d 224; Brunsdale v. Bagge, 224 N.W.2d 384, 387 (N.D.1974). Although a written contract can only be modified by a contract in writing or by an executed oral agreement, an oral agreement is executed "whenever the party performing has incurred a detriment which that party was not obligated by the original contract to incur." N.D.C.C. § 9-09-06. A legal detriment need not be actual, and it does not matter if it had any value to Sanders. See Mitchell v. Barnes, 354 N.W.2d 680, 682-83 (N.D.1984). Gravel Products suffered a legal detriment by having to delay assignment of the insurance policy to accommodate Sanders' request, a detriment it was not obligated by the original agreement to incur. We conclude, as a matter of law, Sanders waived the 30-day period for assignment of the insurance policy.

[¶ 12] We conclude the district court's finding that Gravel Products did not breach the...