Sanderson v. First Sec. Leasing Co., 900254

CourtSupreme Court of Utah
Writing for the CourtZIMMERMAN; HALL, C.J., HOWE
Citation844 P.2d 303
Parties124 Lab.Cas. P 57,210, 8 IER Cases 154, 4 NDLR P 128 Russell W. SANDERSON, Plaintiff and Appellant, v. FIRST SECURITY LEASING COMPANY, a Utah corporation, Defendant and Appellee.
Docket NumberNo. 900254,900254
Decision Date08 December 1992

Bruce Wycoff, Salt Lake City, for Russell W. Sanderson.

Janet Hugie Smith, Rick L. Rose, Thomas R. Karrenberg, Salt Lake City, for First Sec. Leasing Co.


Plaintiff Russell W. Sanderson appeals from summary judgment in favor of defendant First Security Leasing Company ("First Security"). Sanderson sued his former employer, First Security, claiming that First Security's discharge of him violated an implied-in-fact employment contract and breached an implied-in-law covenant of good faith and fair dealing. We affirm in part and reverse in part.

In reviewing a grant of summary judgment, we view the facts and all reasonable inferences drawn therefrom in a light most favorable to the nonmoving party. Smith v. Batchelor, 832 P.2d 467, 468 (Utah 1992); Rollins v. Petersen, 813 P.2d 1156, 1158 (Utah 1991); Utah State Coalition of Senior Citizens v. Utah Power & Light Co., 776 P.2d 632, 634 (Utah 1989). We state the facts in this case accordingly. See Sandy City v. Salt Lake County, 827 P.2d 212, 215 (Utah 1992).

In October of 1980, First Security hired Sanderson to collect delinquent accounts. Throughout his first eight years at First Security, Sanderson received favorable performance evaluations and regular increases in salary and responsibility, becoming manager of First Security's equipment services division and account services department in 1984. He later served as a vice president of the company and as one of five members of the senior management committee, positions he held until his termination.

In December of 1988, First Security relieved Sanderson of his duties in the account services department but stressed that the change was not due to any fault on his part. A memo from C.S. "Bud" Cummings, president of First Security and then Sanderson's immediate supervisor, said, "Russ [Sanderson] has done an excellent job in managing both areas," but noted that in light of the increased responsibility of managing equipment services, "it is not fair to spread his talents so thin."

Around the time Cummings instructed him to devote all his efforts to equipment services, Sanderson became ill. His illness continued until his termination. Although the precise nature of his ailment is unclear, it apparently involved both unexplained chest pains requiring the attention of a physician and depression or stress requiring the attention of a social worker and a psychiatrist. In his deposition, Sanderson estimated that he took approximately twenty-seven days of sick leave during his illness and that he was hospitalized at least six times. 1

Because he was concerned about his job, Sanderson kept in touch with Cummings. In his deposition, Sanderson testified that on several occasions, Cummings told him to "take all the time ... needed, do what needed to [be] done. When [Sanderson] was ready to come back the job would be there." Sanderson also testified in his deposition that Cummings instructed him to entrust his major responsibilities to Sanderson's assistant vice presidents until he felt he could return to work. Sanderson cannot, however, remember the dates or particulars of these conversations.

Four months after Sanderson became ill, First Security placed Gary Judd as an intermediate supervisor between Sanderson and Cummings, so that Sanderson no longer reported directly to the president of the company. Sanderson testified in his deposition that Judd "was out to get [him]" because of past disagreements. During his first month as Sanderson's intermediate supervisor, Judd ordered an audit of equipment services, an audit that revealed numerous problems in Sanderson's department.

On May 19, 1989, Cummings told Sanderson that he was disappointed in him and that Sanderson must either accept a demotion or be terminated. Because Cummings refused to specify the level or salary of the position to which he would be demoted, Sanderson chose termination. Before our court, First Security attempts to characterize this choice as a voluntary resignation, but the company's own termination form, signed by Judd, identifies the action as an "involuntary termination[ ]" for "[u]nsatisfactory performance."

In the nine years Sanderson worked at First Security, the company issued three separate handbooks containing statements on termination. The first two, "Benefits and Policy Overview" ("benefits handbook") and "First Security Standards for Employee Conduct" ("standards handbook"), explicitly provided that employment with First Security was at-will, so that employees could quit or be fired at any time for any reason. First Security distributed these two handbooks to each employee and required its employees to sign an annual statement indicating that they understood and would follow the policies outlined in the standards handbook. Sanderson complied with this requirement. First Security distributed the third handbook, "First Security Banks [sic] Operating Procedures" ("the procedures handbook"), only to managers, including Sanderson. The procedures handbook set forth detailed guidelines for firing employees, requiring a series of informal and formal evaluations, warnings, and opportunities to improve performance or cease violating company policies. It is undisputed that Cummings did not provide Sanderson with such evaluations, warnings, and opportunities when he fired him. However, the procedures handbook also included the following paragraph ("paragraph six"):

In situations where employee behavior warrants immediate termination the stages of this process do not need to be followed. Termination in these cases must be approved by the appropriate Division/Subsidiary Head Office.

On September 28, 1989, Sanderson sued First Security for wrongful termination, claiming that First Security breached an employment contract implied from its procedures handbook and Cummings' oral assurances and violated the implied covenant of good faith and fair dealing. The trial judge granted summary judgment for First Security, and Sanderson appealed. We affirm in part and reverse in part.

Before turning to the merits of this case, we state the applicable standard of review. Summary judgment is appropriate only when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Utah R.Civ.P. 56(c); Sandy City, 827 P.2d at 217-18; Rollins, 813 P.2d at 1159; Landes v. Capital City Bank, 795 P.2d 1127, 1129 (Utah 1990). Because entitlement to summary judgment is a question of law, no deference is due the trial court's determination of the issue. We affirm only if the decision before us was correct. Ward v. Richfield City, 798 P.2d 757, 759 (Utah 1990).

This appeal requires us to revisit the evolving doctrine of employment at will. In 1989, this court converted the common law rule stating that absent an express agreement, employment was at-will into a mere presumption. We stated that a plaintiff could rebut this presumption by proving the existence of an implied-in-fact employment contract. Berube v. Fashion Centre, Ltd., 771 P.2d 1033, 1044 (Durham, J., joined by Stewart, J.); id. at 1051 (Zimmerman, J., concurring in the result) (Utah 1989). Sanderson correctly notes that the existence of an implied-in-fact contract is a factual question committed to the sound discretion of the jury. See id. at 1044 (Durham, J., joined by Stewart, J.); id. at 1052 (Zimmerman, J., concurring in the result). However, the court retains the power to decide whether, as a matter of law, a reasonable jury could find that an implied contract exists. See Brehany v. Nordstrom, Inc., 812 P.2d 49, 56 (Utah 1991); Berube, 771 P.2d at 1052 (Zimmerman, J., concurring in the result). If a reasonable jury cannot find that an implied contract exists, summary judgment is appropriate. Caldwell v. Ford, Bacon & Davis Utah, Inc., 777 P.2d 483, 486 (Utah 1989).

With this standard in mind, we review Sanderson's arguments for the existence of an implied-in-fact contract. We begin with Sanderson's contention that First Security's procedures handbook created an implied contract to fire employees only in accordance with the termination guidelines set forth in that manual. In past cases, we have recognized that employee handbooks may create such contractual rights. See, e.g., Arnold v. B.J. Titan Servs. Co., 783 P.2d 541, 544 (Utah 1989) (per curium); Lowe v. Sorenson Research Co., 779 P.2d 668, 670 (Utah 1989); Caldwell, 777 P.2d at...

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