Vigil v. Arzola

• Decision Date: 05 July 1983
• Docket Number: No. 5921,5921
• Citation: 699 P.2d 613,1983 NMCA 82,102 N.M. 682
• Parties: , 2 IER Cases 377 Pete B. VIGIL, Plaintiff-Appellee and Cross-Appellant, v. Ernesto ARZOLA, Jr. and Tierra Del Sol Housing Corporation, Defendants-Appellants and Cross-Appellees.
• Court: Court of Appeals of New Mexico

Page 613

699 P.2d 613

102 N.M. 682, 2 IER Cases 377

Pete B. VIGIL, Plaintiff-Appellee and Cross-Appellant, v. Ernesto ARZOLA, Jr. and Tierra Del Sol Housing Corporation Defendants-Appellants and Cross-Appellees.

No. 5921.

Court of Appeals of New Mexico.

July 5, 1983.

Stephen A. Hubert, Stephen E. Hosford, Beverly A. Singleman, Martin, Cresswell & Hubert, P.A., Las Cruces, for plaintiff-appellee

Anthony F. Avallone Law Systems of Las Cruces, P.A., Las Cruces, for defendants-appellants.

OPINION

BIVINS, Judge.

Pete B. Vigil (plaintiff) sought relief against his former employers, Ernesto Arzola, Jr. (Arzola) and Tierra Del Sol Housing Corporation (TDS), asserting three separate causes of action: (1) breach of employment contract; (2) retaliatory discharge; and (3) violation of 42 U.S.C. Sec. 1983 (1981). At the conclusion of all evidence, the trial court dismissed the first two causes of action, leaving only the Sec. 1983 claim. The jury awarded plaintiff $25,000 compensatory damages and $50,000 punitive damages. After entry of judgment the trial court, sua sponte, held the award of punitive damages against TDS improper. Defendants appeal from the judgment, and plaintiff cross-appeals the dismissal of his breach of contract and retaliatory discharge claims and also the trial court's deletion of the punitive damage award. We reverse the judgment against defendants and the dismissal of the retaliatory discharge claim, and affirm the dismissal of the breach of contract claim.

A brief summary of the events leading up to plaintiff's termination will be helpful to an understanding of the issues on appeal.

Incorporated as a not-for-profit corporation under the law of New Mexico, TDS, which enjoys a tax-exempt status, was organized to offer technical assistance to low income persons who qualify for cooperative home building projects. TDS receives its funding primarily, if not entirely, from federal sources. At oral argument TDS was characterized, without substantial contradiction, as "nothing but an arm of FHA."

A fifteen-member board of directors manages the corporation without pay. Arzola, as the director, has responsibility for the corporation's day-to-day operation and has the power to hire and fire personnel.

Plaintiff claims his employment with TDS was terminated after he made statements criticizing certain corporate procedures, including expenditures of public funds. Following the criticism, Arzola terminated plaintiff for lack of performance. The personnel committee of TDS reviewed this action and recommended reinstatement. The board stood by the termination. This suit followed.

1. Defendants' appeal.

Defendants contend plaintiff's failure to prove color of state law requires reversal. We agree. We apply federal substantive law in determining this issue.

42 U.S.C. Sec. 1983 provides:

Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress. For the purposes of this section, any Act of Congress applicable exclusively to the District of Columbia shall be considered to be a statute of the District of Columbia. (Emphasis added). Defendants argue the emphasized language means that, in order to be liable, they must have acted under color of the law of the State of New Mexico. Plaintiff responds claiming that Sec. 1983, as a remedial statute, should be liberally construed to give effect to its purpose--enforcement of the Fourteenth Amendment. See Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961). Plaintiff urges this Court to find that federal involvement satisfies the color of state law requirement. This argument has no merit. See Ellis v. Blum, 643 F.2d 68 (2nd Cir.1981); Hubbert v. United States Parole Com'n., 585 F.2d 857 (7th Cir.1978); Williams v. Rogers, 449 F.2d 513 (8th Cir.1971), cert. denied, 405 U.S. 926, 92 S.Ct. 976, 30 L.Ed.2d 799 (1972); Browns v. Mitchell, 409 F.2d 593 (10th Cir.1969).

Even if it could be said that state action was involved, the State in no way compelled the decision to discharge. In Rendell-Baker v. Kohn, 457 U.S. 830, 102 S.Ct. 2764, 73 L.Ed.2d 418 (1982), the Supreme Court affirmed dismissal of Sec. 1983 claims by certain discharged employees of a private school which derives its income primarily from public sources and which is regulated by public authorities. The Court held that the school did not act under color of state law when it discharged the employees. Quoting from its decision in Blum v. Yaretsky, 457 U.S. 991, 102 S.Ct. 2777, 73 L.Ed.2d 534 (1982), the Supreme Court in Kohn said, " '[A] State normally can be held responsible for a private decision only when it has exercised coercive power or has provided such significant encouragement, either overt or covert, that the choice must in law be deemed to be that of the State.' " 102 S.Ct. at 2771. The State of New Mexico, like the State of Massachusetts in Kohn, does not purport to regulate or control the personnel termination procedures of a private entity.

Thus, plaintiff's discharge was not compelled or influenced in any way by any state action. The judgment based on the Sec. 1983 claim must be reversed and the claim dismissed. Having so concluded, this disposes of the remainder of defendants' points and also disposes of plaintiff's cross-appeal issue involving punitive damages, since those damages were awarded based on the Sec. 1983 action.

We turn now to the remaining two issues in plaintiff's cross-appeal involving dismissal of his claim based on breach of contract and retaliatory discharge.

.2. Plaintiff's cross-appeal.

(a) Standard of review.

Although the trial court ruled on defendants' motions for directed verdict at the close of all evidence, it is clear that Counts I and II were dismissed under NMSA 1978, Civ.P.R. 12(b)(6) (Repl.Pamp.1980), for failure to state claims. Accordingly, for the purposes of review, all well-pleaded allegations of plaintiff's amended complaint must be taken as true. Buhler v. Marrujo, 86 N.M. 399, 524 P.2d 1015 (Ct.App.1974).

(b) "Terminable-at-will" rule.

In Bottijliso v. Hutchison Fruit Co., 96 N.M. 789, 635 P.2d 992 (Ct.App.1981), we said, "Our courts have long adhered to the rule that an employee is terminable by an employer 'at will,' either without cause or for a specific reason, in the absence of a contract of employment for a definite term * * *." 96 N.M. at 791, 635 P.2d 992. Our appellate courts have also recognized that even where characterized as "permanent," a contract for employment, not supported by any consideration other than performance of duties and payment of wages, is a contract for an indefinite period. It is terminable at the will of either party so that a discharge without cause does not justify recovery of damages. Gonzales v. United Southwest Nat. Bank, 93 N.M. 522, 602 P.2d 619 (1979); Garza v. United Child Care, Inc., 88 N.M. 30, 536 P.2d 1086 (Ct.App.1975).

While acknowledging these rules, plaintiff says defendants breached his employment contract by failing to comply with the company's termination requirements as set forth in the personnel manual. In addition, plaintiff argues that the facts and circumstances of his case justify a new cause of action in either tort or contract.

(c) Breach of contract.

Relying on Forrester v. Parker, 93 N.M. 781, 606 P.2d 191 (1980), plaintiff argues that he could not be discharged except in accordance with the Personnel & Procedure Policies of TDS and, accordingly, the dismissal of his breach of contract claim was error. This argument fails. In Forrester the plaintiff had completed his probationary period; here, plaintiff was discharged prior to the expiration of his six-month probation period. Thus, he was not entitled to the procedural steps set out in the personnel manual.

Even if it could be argued that the personnel manual controlled, we do not read that manual as requiring "just cause" before involuntary discharge of an employee, as claimed by plaintiff. Although a question exists as to whether defendants afforded plaintiff administrative due process as required in the personnel manual, we construe this provision, as well as the provision requiring a statement of reasons for dismissal, to apply only to nonprobationary employees. It would make little sense to create a separate category of probationary employees if they were to be afforded the same procedural rights as nonprobationary employees. The trial court did not err in dismissing the breach of contract claim based on the personnel manual.

(d) Retaliatory discharge.

Defendants rely upon the terminable-at-will rule to preclude plaintiff's claim for retaliatory discharge. That rule rests upon the concept of freedom of contract and mutuality of obligation; since an employer cannot force an employee into labor, neither should an employee have the power to force an employer to hire or retain him. This rule of mutuality apparently evolved in the nineteenth century during the industrial revolution when the employer-employee relationship became more impersonal. One court described the at will rule as permitting an employer to discharge, "for good cause, for no cause or even for cause morally wrong, without being thereby guilty of legal wrong." Payne v. Western & A.R.R., 81 Tenn. (13 Lea) 507 (1884), overruled on other grounds, Hutton v. Watters, 132 Tenn. 527, 179 S.W. 134 (1915). Some authorities have suggested that various social and economic factors such as the concepts of freedom of contract, free enterprise, and laissez-faire provided the foundation for its wide acceptance.

The harsh results of the at will rule...