Thompson v. Associated Potato Growers

• Decision Date: 11 May 2000
• Docket Number: No. 990296.,990296.
• Citation: 2000 ND 95,610 N.W.2d 53
• Parties: Dennis THOMPSON, Plaintiff and Appellee, v. ASSOCIATED POTATO GROWERS, INC., a North Dakota corporation, Defendant and Appellant, and Duane Hovet, Defendant.
• Court: North Dakota Supreme Court

610 N.W.2d 53

2000 ND 95

Dennis THOMPSON, Plaintiff and Appellee, v. ASSOCIATED POTATO GROWERS, INC., a North Dakota corporation, Defendant and Appellant, and Duane Hovet, Defendant.

No. 990296.

Supreme Court of North Dakota.

May 11, 2000.

Joel F. Arnason (on brief), Arnason Law Office, Grand Forks, N.D., and Dennis Thompson (argued), for plaintiff and appellee.

Donald J. Olson (argued) and Darin B. Barker (appeared), Camrud, Maddock, Olson & Larson, Ltd., Grand Forks, N.D., for defendant and appellant.

SANDSTROM, Justice.

[¶ 1] Associated Potato Growers, Inc., appealed from a judgment awarding Dennis Thompson damages for wrongful termination of his employment. We hold an employer's decision to terminate an employee for cause must be assessed by the trier of fact under an objective standard of reasonableness. Because the trial court did not apply that standard in deciding Associated did not have cause to terminate Thompson, we reverse and remand for further proceedings.

I

[¶ 2] Associated is a cooperative corporation in the business of storing, washing, and selling potatoes belonging to its members. Associated hired Thompson as general manager under a written contract that ran from August 1, 1991, through July 31, 1992, and allowed Thompson "to extend and renew [the] agreement for up to two one year consecutive terms" by giving Associated "notice of his intention to renew and extend not later than 60 days prior to the end of the then current term." Thompson extended the written contract from August 1, 1992, through July 31, 1993.

[¶ 3] On May 28, 1993, Associated's board of directors met to discuss allegations that Thompson had altered grades of potatoes and changed growers' records. The minutes of the meeting state Thompson admitted changing growers' records but claimed he had the right to make the changes. The minutes also indicate the Board and other Associated office employees did not believe Thompson had the right to change growers' records. At that meeting, the Board decided to give Thompson a two-week leave of absence and asked Associated's accountants to perform a "mini-audit" of growers' records. On May 29, Thompson informed Associated he had elected to extend the parties' written employment contract for another year.

[¶ 4] Thompson was not present at a June 10, 1993, meeting, where the Board reviewed the accountants' "mini-audit" and decided to terminate Thompson, without cause, subject to legal review of his employment contract. Thompson was present at a June 14 meeting, where the Board asked him to resign, but he refused. The minutes of the June 14 meeting reflect Thompson agreed to meet with the accountants and a committee of Board members to explain his actions. On June 16, Thompson met with the Board subcommittee and accountants. On June 17, the Board subcommittee reported to the full Board, which thereafter decided to terminate Thompson for cause. Associated notified Thompson his employment was terminated effective June 18, 1993, under paragraph 14 of the employment contract, which was entitled "Termination for Cause" and provided "[t]he EMPLOYER may terminate this Agreement immediately for material violation of the EMPLOYER'S policies or material breach of the provisions of this Agreement, including specifically the failure to perform his duties as required hereunder." [¶ 5] Thompson sued Associated for wrongful termination.¹ After a bench trial, the trial court decided Thompson did not commit a material violation of the employer's policies or a material breach of the provisions of the employment agreement, and Thompson's actions were not dishonest but were intended to insure fair compensation for potato growers. The court decided Associated did not have cause to terminate Thompson and awarded him $129,400 in damages.

[¶ 6] The trial court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. § 27-05-06. Associated's appeal is timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. art. VI, §§ 2 and 6, and N.D.C.C. § 28-27-01.²

II

[¶ 7] We review a trial court's findings of fact under the clearly erroneous standard of N.D.R.Civ.P. 52(a). A finding of fact is clearly erroneous if it is induced by an erroneous application of the law, if no evidence exists to support it, or if on the entire record, we are left with a definite and firm conviction a mistake has been made. Brown v. Brown, 1999 ND 199, ¶ 10, 600 N.W.2d 869. Questions of law are fully reviewable on appeal. Haff v. Hettich, 1999 ND 94, ¶ 9, 593 N.W.2d 383.

III

[¶ 8] Under North Dakota law, employment is presumed to be at will, and an employer may terminate an employee with or without cause. N.D.C.C. § 34-03-01; Bykonen v. United Hospital, 479 N.W.2d 140, 141 (N.D.1992); Hillesland v. Federal Land Bank Ass'n, 407 N.W.2d 206, 210-11 (N.D.1987); Bailey v. Perkins Restaurants, Inc., 398 N.W.2d 120, 122 (N.D. 1986). By contract, however, the parties can modify the at-will presumption and define their contractual rights regarding termination. See Bykonen, at 141; Hillesland, at 211; Bailey, at 122.

A

[¶ 9] Associated employed Thompson under a written employment contract, and we initially consider the scope of the parties' employment promise under that written contract. The construction of a written contract to determine its legal effect is a question of law. Olson v. Souris River Telecomms. Coop., Inc., 1997 ND 10, ¶ 8, 558 N.W.2d 333. On appeal we will independently examine and construe the contract to determine whether the trial court erred in construing it. Eldridge v. Evangelical Lutheran Good Samaritan Soc., 417 N.W.2d 797, 799 (N.D.1987). We construe contracts as a whole to give effect to each provision to determine the parties' intent. Olson, at ¶ 8; Eldridge, at 799.

[¶ 10] The parties' written contract authorized the general manager to "direct [Associated] with the objective of providing maximum patron equity, return on invested capital and providing growers with efficient facilities for washing, processing and marketing potatoes" and "develop policies and goals that cover company operations, personnel, financial performance, sales performance and growth." The parties' written contract generally outlined duties and responsibilities for the general manager and also provided:

14. Termination for Cause. The EMPLOYER may terminate this Agreement immediately for material violation of the EMPLOYER'S policies or material breach of the provisions of this Agreement, including specifically the failure to perform his duties as required hereunder. In the event of termination for cause, the EMPLOYEE shall be paid at the usual rate of his annual Base Salary through the date of termination specified in any notice of termination.

[¶ 11] Other courts have construed employment contracts to permit an employer to terminate an employee for good cause even if the contract provides reasons for termination which do not specifically mention good cause. See Mertyris v. P.A.M. Transport, Inc., 310 Ark. 132, 832 S.W.2d 823, 825 (1992)

; H. Vincent Allen & Assocs. v. Weis, 63 Ill.App.3d 285, 19 Ill.Dec. 893, 379 N.E.2d 765, 772 (1978); Wolfe v. Graether, 389 N.W.2d 643, 657 (Iowa 1986); Walpus v. Milwaukee Elec. Tool Corp., 248 Neb. 145, 532 N.W.2d 316, 322-23 (1995). See generally 1 Henry H. Perritt, Jr., Employee Dismissal Law and Practice § 6.19 (4th ed.1998). In Mertyris, at 825, for example, the Arkansas Supreme Court said it would be unreasonable and absurd to interpret an employment manual as implicitly foreclosing termination for criminal acts or wrongful conduct beyond the conduct specifically listed in the manual as grounds for termination. The court refused to hold a list of conduct justifying automatic termination constituted an implied promise not to dismiss an employee for criminal conduct, wrongful act, or other legitimate reason. Id.

[¶ 12] Here, paragraph 14 of the parties' written contract specifically provides for "Termination for Cause" in language permitting an employer to terminate the "Agreement immediately for material violation of the EMPLOYER'S policies or material breach of the provisions of this Agreement, including specifically the failure to perform his duties as required hereunder." The word "including" ordinarily is not a word of limitation, but a word of enlargement. See Lucke v. Lucke, 300 N.W.2d 231, 234 (N.D.1980)

. Although Associated and Thompson could have contracted for an exclusive list of grounds for termination, the language of this contract does not say termination for cause is limited only to the reasons specifically enumerated in paragraph 14. In the absence of language expressly limiting the reasons for termination, we decline to construe the provisions of paragraph 14 as words of limitation. Rather, we construe the parties' contract to permit termination for cause, which includes, but is not limited to, the reasons stated in paragraph 14.

B

[¶ 13] We next consider whether there was a breach of the employment contract, which raises issues about institutional responsibility for the determination of cause for termination. Relying on Cotran v. Rollins Hudig Hall Int'l, Inc., 17 Cal.4th 93, 69 Cal.Rptr.2d 900, 948 P.2d 412 (1998), Associated argues the trial court, as the trier of fact, impermissibly substituted its judgment for Associated's determination it had cause to terminate Thompson.

[¶ 14] Cotran involved an employee hired under an implied agreement permitting termination for good cause. 948 P.2d at 414. The employer fired the employee on the basis of its investigation and conclusion the employee had more likely than not committed sexual harassment. Id. at 415. The employee denied the sexual harassment. Id. at 416. The trial court instructed the jury to decide whether the claimed acts occurred and refused to instruct the jury not to substitute its opinion for the employer's decision. Id. The jury decided the employee had not engaged in sexual harassment...