St. Yves v. Mid State Bank, No. 54790-4

• Court: United States State Supreme Court of Washington
• Writing for the Court: UTTER; PEARSON; DORE; GOODLOE
• Citation: 111 Wn.2d 374,757 P.2d 1384
• Docket Number: No. 54790-4
• Decision Date: 15 July 1988
• Parties: , 3 IER Cases 1187 Robert ST. YVES, Respondent, v. MID STATE BANK, Petitioner.

Page 374

111 Wn.2d 374 757 P.2d 1384, 3 IER Cases 1187 Robert ST. YVES, Respondent,
v.
MID STATE BANK, Petitioner. No. 54790-4. Supreme Court of Washington,
En Banc. July 15, 1988.

[757 P.2d 1385] Michael Tabler, Waterville, Dano Law Firm, Harrison Dano, Moses Lake, for petitioner.

Page 375

Carlson & Drewelow, Larry Carlson, Paul James, Wenatchee, for respondent.

UTTER, Justice.

The trial court dismissed a claim of wrongful discharge by a former president of Mid State Bank. The Court of Appeals reversed. We hold the trial court properly dismissed the claim, as the unambiguous terms of the former president's written employment contract allowing termination at will make irrelevant the provisions of the bank's personnel policy manual.

Mid State Bank hired Robert St. Yves as its president and chief executive officer on June 1, 1984 pursuant to a written employment agreement. The agreement contains three pertinent clauses:

II TERM

The initial term of St. Yves' employment shall be from the 1st day of June, 1984 to the 31st day of May, 1986. Said term shall be automatically renewed for successive one year terms unless either party advises the other with 60 days written notification that the employment, or this agreement in its then current form, will not be renewed at the end of the term.

* * *

X

TERMINATION

St. Yves' right to compensation will cease upon termination of his employment for any reason, and the term hereof shall thereupon end. Upon such termination, he will be entitled to receive his base salary accrued to the date of termination together with such additional fringe benefits which he would otherwise have been entitled to receive for such year, accrued to the date of termination.

St. Yves' termination by bank at any time, during any term of employment, with or without cause or notice, shall not constitute a breach of this agreement by bank.

XI ENTIRE AGREEMENT

The foregoing constitutes the entire agreement between the parties and no modification of any of the provisions hereof shall be binding upon either St. Yves or

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bank unless in writing, signed by the party against whom such modification is sought to be enforced.

On May 5, 1986, 27 days before the initial term of employment was to expire, the bank's board of directors held a special meeting at which they voted to terminate St. Yves' employment. The bank did not state its reasons for terminating St. Yves. Shortly thereafter St. Yves sued the bank, alleging violation of the employment agreement and violation of the bank's personnel policy manual, which he claimed had become a part of the employment agreement. The personnel policy manual provides for informal counseling if an employee's performance fails to meet requirements, written[757 P.2d 1386] warning and formal counseling in the event of a repeated or serious problem, probation in cases of a major job performance or conduct problem, and discharge for failure to achieve the specified results within the probation period. Only flagrant disregard for policies and practices, such as gross insubordination or physical violence, warrant immediate discharge under the personnel policy manual.

The bank moved to dismiss St. Yves' complaint under CR 12(b)(6), asserting it had the right to terminate St. Yves at will under the terms of the employment agreement. St. Yves filed an affidavit in response, asserting it was his understanding that he would not be terminated absent just cause pursuant to the bank's personnel policy manual. St. Yves' response also included an affidavit by the former president of the bank, stating that when he drafted the personnel policy manual in 1984 he intended that the president of the bank be covered by the manual.

The trial court dismissed the action under CR 12(b)(6), finding St. Yves had failed to state a claim for wrongful discharge or breach of contract. The bank appealed, and the Court of Appeals reversed, finding a question of fact existed as to whether St. Yves was protected from discharge at will by the terms of the personnel policy manual. St. Yves v. Mid State Bank, 50 Wash.App. 95, 748 P.2d 633 (1987). This court granted the bank's petition for review.

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Although the trial court dismissed this action under CR 12(b)(6) for failure to state a claim, it did not exclude St. Yves' supporting affidavits. We therefore treat this matter as a summary judgment, applying the following rule:

... If, on a motion asserting [failure] to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in rule 56 ...

CR 12(b). In ruling on a motion for summary judgment, we must consider the material evidence and all reasonable inferences therefrom in favor of St. Yves. See Klinke v. Famous Recipe Fried Chicken, Inc., 94 Wash.App.2d 255, 256, 616 P.2d 644 (1980).

The parol evidence rule provides:

[P]arol or extrinsic evidence is not admissible to add to, subtract from, vary, or contradict written instruments which are contractual in nature and which are valid, complete, unambiguous, and not affected by accident, fraud, or mistake.

Emrich v. Connell, 105 Wash.2d 551, 555-56, 716 P.2d 863 (1986), quoting Buyken v. Ertner, 33 Wash.2d 334, 341, 205 P.2d 628 (1949).

St. Yves does not allege the employment agreement is invalid, incomplete or affected by accident, fraud, or mistake. He alleges, however, that the agreement is ambiguous as to term of employment and termination. It is both possible and reasonable to read the employment agreement between St. Yves and the bank as internally consistent and not ambiguous. Ambiguity will not be read into a contract if it can reasonably be avoided. McGary v. Westlake Investors, 99 Wash.2d 280, 285, 661 P.2d 971 (1983).

St. Yves asserts that paragraphs II and X of the employment agreement create an ambiguity. However, paragraph II has to do with the term of employment, whereas paragraph X is a more specific clause dealing with discharge. It qualifies the rest of the agreement, including paragraph II, by stating explicitly: "St Yves' termination by

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bank at any time, during any term of employment, with or without cause or notice, shall not constitute a breach of this agreement by bank." (Italics ours.) The phrasing of paragraph X indicates the parties to the agreement did not find any contradiction between the existence of set terms of employment and discharge in the middle of one of those terms. See Kemper v. First Nat'l Bank, 94 Ill.App.3d 169, 49 Ill.Dec. 799, 418 N.E.2d 819 (1981) (the power to contract for a definite term is consistent with the power to discharge an [757 P.2d 1387] employee before the end of the term). Paragraph II creates only a presumptive term of employment, which may be terminated under the procedures of paragraph X. Thus, each clause of the employment agreement can be given effect, and it is not ambiguous.

Although parol evidence may be admitted to show a contract is not integrated, it is not admissible to create an ambiguity. Washington Fish & Oyster Co. v. G.P. Halferty & Co., 44 Wash.2d 646, 659, 269 P.2d 806 (1954). "It is the function of the court to examine a contract to determine whether it is either so ambiguous or incomplete as to admit of parol evidence to ascertain the intent of the parties." Halferty, at 659, 269 P.2d 806. Here, it appears that the personnel policy manual would create an ambiguity as to whether cause is required for termination; that ambiguity does not exist in the terms of the employment agreement. The personnel policy manual is therefore inadmissible.

The Court of Appeals found there was a question of fact for the jury to determine if the...