Michael Cole, Respondent, vs. Holland Neway International, Inc., et al., Appellants.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A03-609

 

Michael Cole,

Respondent,

 

vs.

 

Holland Neway International, Inc., et al.,

Appellants.

 

Filed March 16, 2004

Affirmed Hudson, Judge

 

Hennepin County District Court

File No. 01-14847

 

Lewis A. Remele, Jr., Jeffery S. Brockmann, Bassford Remele, P.A., 33 South Sixth Street, Suite 3800, Minneapolis, Minnesota 55402-3707 (for respondent)

 

Matthew E. Damon, Kari L. Hainey, Halleland Lewis Nilan Sipkins & Johnson, P.A., 600 Pillsbury Center South, 220 South Sixth Street, Minneapolis, Minnesota 55402-4501; and

 

Richard A. Samdal (pro hac vice), Varnum, Riddering, Schmidt & Howlett, LLP, Bridgewater Place, 333 Bridge Street Northwest, P.O. Box 352, Grand Rapids, Michigan 49501-0352 (for appellants)

 

            Considered and decided by Stoneburner, Presiding Judge; Anderson, Judge; and Hudson, Judge.

U N P U B L I S H E D   O P I N I O N

HUDSON, Judge

            Appellant Holland Neway International, Inc., challenges the district court's finding that respondent Michael Cole was entitled to $24,000 in severance pay after his termination.  Because the written agreement between the parties was ambiguous, the district court properly considered parol evidence and correctly determined that Cole should receive severance pay.  Respondent Cole argues that the district court erred by determining that he was not entitled to civil penalties against appellant under Minn. Stat. § 181.13 (2002).  Because there was a legitimate dispute over whether severance benefits were owing to respondent, we affirm.

FACTS

            Respondent Michael Cole began his employment with Neway Anchorlok, the predecessor of appellant Holland Neway International (hereinafter Holland) in November 1988.  In September 1999, Cole left Holland to work for another company. 

            In May or June of 2000, Cole learned that he would be laid off from his job.  He contacted Holland and spoke with Bill Wakefield, the vice president of the Holland division he worked in before leaving the company.  Cole and Wakefield discussed the terms under which Cole would return to work for Holland. 

            Cole received a letter from Wakefield that outlined the terms of his employment, including vacation, pension, and retirement benefits.  Paragraph 9 of the letter stated:

With regard to the potential of having differing hiring dates, Mike, you should know that for service award purposes all years of service with Holland Neway or Neway Anchorlok are counted.  Your participation with the 401(k) and pension plans is as explained above.  For any other purposes, your date of hire will be the date upon which you begin working for Holland Neway in this new role.

 

            Cole returned to work for Holland in August 2000.  In April 2001, Holland decided to lay Cole off for financial reasons.  Cole was informed that he would not receive severance benefits because he had been with the company less than one year. 

            Cole filed a lawsuit against Holland, alleging that Holland breached its contract with him by refusing to pay him severance benefits and that he was entitled to receive court costs and attorney fees as a penalty against Holland under Minn. Stat. § 181.13 (2002).

            The matter was tried by the court.  Counsel for Holland objected to Cole's testimony about his conversations with Wakefield and his understanding of the contract as inadmissible parol evidence.  The court allowed the testimony and asked the parties to submit post-trial memoranda on the issue.  Cole acknowledged that during his prior employment with Holland, he knew about and participated in the company's service award program, through which employees could receive tokens of recognition based on years of service to the company.  But, Cole testified that he understood from his conversations with Wakefield that he would be given credit for his prior years of service, and that he would be eligible to receive severance pay should he be laid off.  He testified that when he received the July 26 letter, he understood "service award" to include those benefits, including severance, that accrue with length of service.  Holland called human resources manager Patricia Green, who testified that she drafted the July 26 letter and did not intend the term "service award" to include severance pay, and that based on her understanding of the definition of "service award," Cole was not entitled to severance payments under the terms of his employment.  She admitted that she was not party to the conversations between Cole and Wakefield and that she did not know what the two men had discussed.

            After submission of the post-trial memoranda, the district court ruled that the term "service award" in the July 26 letter was ambiguous and that in light of Cole's testimony and the circumstances, Cole was entitled to $24,000 in severance pay.  The district court denied Cole's motion for penalties against Holland, finding that severance pay and wages are not the same.  Holland moved for a new trial, which was denied.  This appeal follows.

D E C I S I O N

I

            Whether a contract is ambiguous is a question of law that this court reviews de novo.  Telex Corp. v. Data Prods. Corp., 271 Minn. 288, 291, 135 N.W.2d 681, 684 (1965).  The use of parol or other extrinsic evidence to clarify an ambiguity is likewise a question of law subject to de novo review.  Mollico v. Mollico, 628 N.W.2d 637, 640 (Minn. App. 2001).

            A contract provision is ambiguous if, by its language alone, it is reasonably susceptible to more than one interpretation.  Rick v. B.D.M.S., Inc., 347 N.W.2d 65, 67 (Minn. App. 1984).  Here, the district court found that the term "service award" as found in paragraph 9 of the July 26 letter to respondent was ambiguous.  Based on the terms of the document, we agree. 

Appellant argues that respondent's proposed meaning for the term "service award" is unreasonable in light of respondent's testimony and his history with the company.  But to reach that conclusion, we must look at the extrinsic evidence that appellant urges us to ignore.  Instead, we base our determination that the contract is ambiguous on the plain language of the document.  The term "service award" is not defined in the letter or in Holland's employee handbook.  While certainly it could refer solely to a program of small rewards and trinkets awarded to employees with length of service, it could also refer to virtually any benefit that accrues based on length of service.  This interpretation does not necessarily "do violence" to the rest of the letter, as appellant's counsel stated at oral arguments.  The whole of paragraph 9 appears to be a catchall, summarizing benefits not otherwise described in the body of the letter.  As a catchall, "service award" could reasonably refer to any length-of-service benefit not addressed specifically, including severance pay.  Because the term is undefined, it is reasonably susceptible to more than one meaning, and the district court correctly found it to be ambiguous.

Having correctly found the term to be ambiguous, the district court looked to extrinsic evidence to determine whether the parties intended for respondent to receive severance pay.  Once ambiguity is found, construction of the contract becomes a question of fact.  Donnay v. Boulware, 275 Minn. 37, 44, 144 N.W.2d 711, 716 (1966).  This court will not overturn a district court's findings of fact unless they are clearly erroneous.  Trondson v. Janikula, 458 N.W.2d 679, 682 (Minn. 1990); Minn. R. Civ. P. 52.01.

The district court here found that respondent specifically discussed severance benefits with Wakefield, and that he was told "it would be as if he never left" employment with appellant.  This finding is supported by respondent's unrebutted testimony.  Appellant's only witness, Patricia Green, acknowledged that she was not a party to the discussions between respondent and Wakefield and did not know what was discussed.  Respondent also testified that he called Wakefield upon receiving the letter, and he was again assured that as long as he returned to the company by a certain date, he would receive full credit for his prior years of service. 

The record supports appellant's assertion that respondent was familiar with the company's severance policy and with its service award program.  However, given the context in which the July 26 letter was written, and respondent's unrebutted testimony describing what he understood to be the terms of his reemployment, the district court did not err in finding that the term "service award," as used in the letter, included severance benefits.[1]

II

Respondent argues that the district court erred by refusing to award him civil penalties against appellant for its violation of Minn. Stat. § 181.13 (2002).  That statute provides that an employer must pay any "wages or commissions" owed to a discharged employee within 24 hours of demand by the employee.  Minn. Stat. § 181.13 (2002).  Minn. Stat. § 181.171 allows an injured employee to bring civil suit against an employer that violates section 181.13.  Minn. Stat. § 181.171, subd. 1 (2002).  If such a claim is successful, and a violation is found, the district court will order the employer to pay the attorney fees and court costs of the employee.  Id. at subd. 3. 

The district court refused to find a violation of Minn. Stat. § 181.13 because "severance pay and wages are not the same."  Statutory construction is a question of law that this court reviews de novo.  Brookfield Trade Ctr., Inc. v. County of Ramsey, 584 N.W.2d 390, 393 (Minn. 1998).  The statute itself does not give this court much guidance as to what monetary benefits are to be included in "wages," but the supreme court has previously held that the statute must be construed strictly.  Chatfield v. Henderson, 252 Minn. 404, 410, 90 N.W.2d 227, 232 (1958).  The supreme court has also stated that the purpose of this statute is to "penalize employers who fail to pay their employees' wages promptly."  Hanson v. Remer, 160 Minn. 453, 462, 200 N.W. 839, 843 (1924).  There is no argument here that appellant failed to pay respondent any part of his base salary.  The only question is whether respondent's unpaid severance benefits are properly included as "wages" under Minn. Stat. § 181.13.

Respondent argues that for purposes of section 181.13, severance pay, like vacation benefits, should be treated as a part of an employee's wages.  See, e.g., Kohout v. Shakopee Foundry Co., 281 Minn. 401, 162 N.W.2d 237 (1968); Brown v. Tonka Corp., 519 N.W.2d 474 (Minn. App. 1994).  Appellant, on the other hand, argues that because respondent was a salaried employee, rather than a wage earner, the statute does not apply to him at all. 

Ultimately, we are not persuaded by appellant's argument, but we agree with the district court that severance benefits, at least here, do not fall under the purview of section 181.13.  We acknowledge that severance pay is properly considered income to an employee once received.  See, e.g., Minn. Stat. § 268.035, subd. 29 (2002) (severance pay considered part of wages for unemployment purposes).  But severance benefits differ from vacation pay in that an employee is not entitled to use his severance benefit at any time.  Although the benefit accrues with length of service, the employee does not receive the benefit until termination.  The benefit is not truly "owing," then, until the employee is terminated.  Here, the parties legitimately disputed whether severance pay was even owed to respondent at the time of his termination.  The purpose of section 181.13 is to penalize employers who fail to pay employees sums that are unquestionably owed.  Appellant here is not such an employer.  Because the severance benefits were not wrongfully withheld from respondent, Minn. Stat. § 181.13 (2002) does not apply.

Affirmed.

           

[1] We also acknowledge appellant's argument that the district court relied on inadmissible hearsay evidence in its order.  The district court excluded Cole's testimony regarding a specific job offer he turned down to become reemployed with Holland, but cited the testimony as evidence supporting its ruling in Cole's favor.  We agree with appellant that this was improper.  But, the record contains enough other evidence to support the district court's order, therefore, the error is harmless.