Geter v. St. Joseph Healthcare

Opinion

1 This memorandum opinion was not selected for publication in the New Mexico Reports. Please 2 see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions. 3 Please also note that this electronic memorandum opinion may contain computer-generated 4 errors or other deviations from the official paper version filed by the Court of Appeals and does 5 not include the filing date. 6 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

7 DAVID GETER, 8 Plaintiff-Appellant, 9 v. NO. 29,315

10 ST. JOSEPH HEALTHCARE 11 SYSTEMS, INC., a New Mexico 12 Non-Profit Corporation, and 13 CATHOLIC HEALTH INITIATIVES, 14 a Colorado Corporation,

15 Defendants-Appellees.

16 APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY 17 Clay Campbell, District Judge

18 Jones, Snead, Wertheim & Wentworth, P.A. 19 John V. Wertheim 20 Santa Fe, NM

21 James C. Ellis 22 Albuquerque, NM

23 for Appellant

24 Modrall, Sperling, Roehl, Harris & Sisk, P.A. 25 Lisa Mann 26 Jennifer A. Noya 27 Emil J. Kiehne 28 Albuquerque, NM

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1 for Appellees

2 MEMORANDUM OPINION 3 VIGIL, Judge. 4 The issue on appeal is whether it was error for the district court to grant 5 summary judgment in favor of Defendant on Plaintiff’s breach of contract claim based 6 on a provision contained in an employee benefits handbook. Assuming without 7 deciding that the handbook created a contract, we conclude that the unambiguous 8 terms of the handbook do not support Plaintiff’s claim. We therefore affirm the 9 district court. 10 BACKGROUND 11 Plaintiff was an employee of Defendant for over ten years. Plaintiff was 12 entitled to receive long-term disability (LTD) benefits if he became disabled during 13 the course of his employment with Defendant. Plaintiff was diagnosed with Emery- 14 Dreyfus Muscular Dystrophy during the course of his employment, and applied for 15 LTD benefits with Defendant’s human resources department. Upon applying for LTD 16 benefits, Plaintiff was provided with the employee benefits handbook at issue in this 17 case. The handbook states that LTD benefits are provided to employees at no cost and

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1 that LTD benefits are “equal to 60 percent of [the eligible employee’s] base salary to 2 a maximum of $5,000 per month.” The handbook also contains a disclaimer,

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1 which states:

2 The information in this handbook is intended as a brief review of the 3 various plan benefits. For more information, see the policies and/or 4 plan documents for the appropriate benefit. In all cases where the 5 policy and/or plan document differ from the information contained 6 in this handbook, the provisions of the policy and/or plan document 7 will govern. Employees are encouraged to pick up and review 8 additional documents before signing up for benefits.

9 The LTD insurance policy between Defendant and its insurance provider states that 10 the benefits based on the sixty percent base salary amount are offset by any deductible 11 sources of income. Federal social security disability compensation is included as one 12 of the deductible sources of income. 13 Plaintiff only read the term of the employee handbook which states that LTD 14 benefits are “equal to 60 percent of [the eligible employee’s] base salary to a 15 maximum of $5,000 per month.” He subjectively understood this term to mean that 16 he would receive sixty percent of his base salary in LTD benefits from his insurance 17 without an offset. Relying on his understanding of the LTD provision in the 18 handbook, Plaintiff began the application process to receive benefits through his 19 employee benefits plan. During the application process, Plaintiff was told by an 20 employee of Defendant’s human resources department that he had to apply for federal 21 social security disability before applying for LTD under his employee benefits plan.

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1 Plaintiff applied for federal social security disability and was determined to be eligible 2 for such benefits. Plaintiff then stopped working and applied for, and received, LTD 3 benefits through the employee benefits plan. Plaintiff later learned that the sixty 4 percent base salary amount was offset by disability benefits he was receiving from 5 social security. 6 Plaintiff filed a complaint for breach of contract or in the alternative promissory 7 estoppel alleging that Defendant breached its enforceable promise that he would 8 receive LTD benefits equal to sixty percent of his base salary without an offset, which 9 he asserted was provided for in the employee handbook. Plaintiff filed a motion for 10 partial summary judgment, and Defendant filed a cross-motion for summary 11 judgment. The district court granted Defendant’s motion for summary judgment and 12 denied Plaintiff’s motion. Plaintiff appeals arguing that summary judgment was 13 improper on the breach of contract claims. Plaintiff does not challenge the summary 14 judgment on his promissory estoppel claims. 15 DISCUSSION 16 Standard of Review 17 “Summary judgment is proper if there are no genuine issues of material fact and 18 the movant is entitled to judgment as a matter of law.” Roth v. Thompson, 113 N.M.

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1 331, 334, 825 P.2d 1241, 1244 (1992); see Rule 1-056 NMRA. “We review these 2 legal questions de novo.” Self v. United Parcel Serv., Inc., 1998-NMSC-046, ¶ 6, 126 3 N.M. 396, 970 P.2d 582. “Interpretation of an unambiguous contract is a question of 4 law which we review de novo.” Nearburg v. Yates Petroleum Corp., 1997-NMCA- 5 069, ¶ 7, 123 N.M. 526, 943 P.2d 560.

6 Defendant Did Not Breach the Contract Because the Handbook Was a Summary 7 of the Agreement Which Expressly Incorporated the More Specific Terms of the 8 Insurance Policy

9 Plaintiff argues that the description of the LTD benefits found in the employee 10 handbook created an unambiguous written promise that Defendant would provide 11 LTD benefits to Plaintiff equal to sixty percent of his base salary without an offset of 12 the amount he received from social security. Plaintiff bases his argument solely on 13 one sentence in the handbook which states that Defendant will provide LTD benefits 14 equal to sixty percent of base salary while ignoring the disclaimer in the handbook 15 which references the insurance policy. 16 Contrary to Plaintiff’s assertion, principles of contract construction require us 17 to consider all the provisions of the employee handbook together as a harmonious 18 whole. See Crow v. Capitol Bankers Life Ins. Co., 119 N.M. 452, 457, 891 P.2d 1206, 19 1211 (1995) (stating that “[a]nother basic principle of contract construction is that ‘[a]

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1 writing is interpreted as a whole’”) (quoting Restatement (Second) of Contracts § 2 202(2) (1979)); Brown v. Am. Bank of Commerce, 79 N.M. 222, 226, 441 P.2d 751, 3 755 (1968) (stating that “a contract should be interpreted as a harmonious whole to 4 effectuate the intentions of the parties, and every word, phrase or part of a contract 5 should be given meaning and significance according to its importance in context of 6 the contract”); Newberry v. Allied Stores, Inc., 108 N.M. 424, 428, 773 P.2d 1231, 7 1235 (1989) (considering the complete language used in a personnel manual as well 8 as the employer’s course of conduct and oral representations regarding the manual to 9 determine whether an implied contract was created). We acknowledge that Defendant 10 strongly argues that the handbook did not create a contract in any manner. However, 11 we assume, without deciding, that the handbook created a written contract. In making 12 this assumption, we also review the handbook as a whole to determine the terms of the 13 contract. 14 To the degree that the handbook is a contract, the disclaimer specifically 15 includes the insurance policy. The express language of the disclaimer states that 16 “[t]he information in this handbook is intended as a brief review of the various plan 17 benefits. For more information, see the [policy] for the appropriate benefit. In all 18 cases where the policy . . . differ[s] from the information contained in this handbook,

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1 the provisions of the policy . . . will govern.” Thus, under the plain, unambiguous 2 language of the handbook, the insurance policy provides the specific information 3 regarding the coverage, and the policy controls if any language of the handbook 4 conflicts with the policy. See Espinosa v. United of Omaha Life Ins. Co., 2006- 5 NMCA-075, ¶ 26, 139 N.M. 691, 137 P.3d 631 (“When a contract or agreement is 6 unambiguous, we interpret the meaning of the document and the intent of the parties 7 according to the clear language of the document, and we enforce the contract or 8 agreement as written.”). Therefore, the more specific terms of the insurance policy 9 are expressly incorporated into the handbook’s terms, and the social security disability 10 offset provision provided in the insurance policy is included in the complete 11 agreement created by both the handbook and the insurance policy. See Master 12 Builders, Inc. v. Cabbell, 95 N.M. 371, 374, 622 P.2d 276, 279 (Ct. App. 1980) 13 (recognizing the general rule of contract construction that allows two documents to 14 be properly construed together when one document refers to the other). As such, 15 Defendant did not breach the contract by applying the offset to Plaintiff’s LTD 16 benefit. 17 Plaintiff further points out that no evidence exists in the record that he read the 18 disclaimer in the handbook. Plaintiff therefore argues that the disclaimer has no effect

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1 on his rights. He relies on DeArmond v. Halliburton Energy Servs., Inc., 2003- 2 NMCA-148, 134 N.M. 630, 81 P.3d 573, for the proposition that an at-will employee 3 must have “read or understood” a contractual provision before it can form a part of his 4 “conscious assent” to the terms of employment. Id. ¶¶ 14, 17. However, DeArmond 5 does not apply here. 6 In DeArmond, we relied on general contract law to conclude that by merely 7 continuing to work for his employer, the worker did not agree to a change in the terms 8 of his employment, which required arbitration of all work-related problems. We 9 agreed with the worker’s argument that “without a showing that he knew about the 10 proposed new contract terms, there can be no proof that he accepted the offer.” Id. ¶ 11 14. In this case, there was no modification of an existing contract. Instead, there was 12 an existing benefit. Further, Plaintiff not only knew of the LTD benefits, he actually 13 read at least part of the employee benefits handbook which described the benefits, and 14 informed him of the disclaimer. Plaintiff’s statement that he did not read the entire 15 employee benefits handbook does not establish a material issue of fact under 16 DeArmond. See Smith v. Price’s Creameries, 98 N.M. 541, 545, 650 P.2d 825, 829 17 (1982) (stating that a party to a contract has a duty to read and familiarize himself with 18 its contents and that one who enters into a contract is presumed to know the terms of

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1 the agreement and is bound to each of its provisions in the absence of fraud, 2 misrepresentation, or other wrongful act of the other party); Crow, 119 N.M. at 457, 3 891 P.2d at 1211 (concluding that isolating one provision from the rest of the contract 4 would “violate the principle that no part of the contract can be isolated and interpreted 5 distinctly from the rest of the contract”). 6 CONCLUSION 7 For the foregoing reasons, we affirm summary judgment in favor of Defendant. 8 IT IS SO ORDERED.

9 _____________________________ 10 MICHAEL E. VIGIL, Judge

11 WE CONCUR:

12 _________________________________ 13 MICHAEL D. BUSTAMANTE, Judge

14 _________________________________ 15 RODERICK T. KENNEDY, Judge