No. 94-492

IN THE SUPREME COURT OF THE STATE OF MONTANA

1995

ROBERT C. SCHAAL,

Plaintiff and Appellant,

-vFLATHEAD VALLEY COMMUNITY COLLEGE,

A COMMUNITY COLLEGE DISTRICT OF ALJG 28 1995

FLATHEAD COUNTY, MONTANA,

Defendant and Respondent.

APPEAL FROM: District Court of the Eleventh Judicial District,

In and for the County of Flathead,

The Honorable Michael OH. Keedy, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Benjamin W. Hilley, Bigfork,. Montana

For Respondent:

Jonathan B. Smith, Deputy Flathead County Attorney,

Kalispell, Montana

Filed:

Submitted on Briefs: March 30, 1995

Decided: AUgUSt 28, 1995
‘/

Justice Fred J. Weber delivered the Opinion of the Court.

This is an appeal from the decision of the Eleventh Judicial

District Court, Flathead County concluding Robert C. Schaal (Dr.

Schaal) should take nothing by his Complaint, and that Flathead

Valley Community College (FVCC) is entitled to judgment on all

counts of that Complaint. We affirm.

Appellant, Dr. Schaal,states the issues as follows:

I . Did the District Court err in dismissing Dr. Schaal's claim

that FVCC breached his employment contract?

II. Did the District Court err in dismissing Dr. Schaal's claim

that FVCC breached the covenant of good faith and fair dealing?

III. Did the District Court err in dismissing Dr. Schaal's claim of

violation of due process?

Dr. Schaal was hired by FVCC under a one-year employment

contract in June of 1989. Dr. Schaal was similarly employed the

following school year but without a formal contract. He was given

a one-year employment contract for the 1991-92 school year. The

contract contained a provision by which procedures and adopted

policies of FVCC were incorporated into the contract. The contract

did not contain any provisions for renewal upon expiration.

On June 4, 1992, Dr. Schaal was notified by the President of

Fvcc, Dr. Howard L. Fryett (President Fryett), that he would

recommend to FVCC's Board of Trustees they not renew Dr. Schaal's

contract for the academic year 1992-93. The Board of Trustees met

on June 9, 1992, and voted as President Fryett recommended.

Dr. Schaal filed an amended complaint against FVCC on four

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1:

counts: (1) breach of contract; (2) wrongful discharge; (3) breach

of the covenant of good faith and fair dealing; and, (4) violation

of due process. FVCC filed an answer and a Motion for Summary

Judgment. On April 12, 1993, the District Court granted FVCC's

Motion for Summary Judgment on count (2) and denied the motion on

the other counts.

The case came to a non-jury trial on May 5, 1994. At the

close of Dr. Schaal's case, FVCC moved for judgment of dismissal on

counts (l), (3) and (4). The District Court set forth four

paragraphs of facts agreed to by both parties in the pretrial order

and made four additional findings of fact and four conclusions of

law. The District Court concluded that Dr. Schaal should take

nothing by his Complaint and that FVCC was entitled to judgment on

all four counts of the Complaint. Judgment to that effect was

entered in favor of FVCC on May 18, 1994. Dr. Schaal appeals from

that judgment setting forth the three above listed issues.

1.

Did the District Court err in dismissing Dr. Schaal's claim

that FVCC breached his employment contract?

Dr. Schaal alleges he submitted a grievance to FVCC in the

form of a letter to President Fryett in compliance with FVCC's

policy for arbitration of grievances (Policy 930). Dr. Schaal

claims his letter was an appropriate submission of grievance

because Section 3 of Policy 930 provides a grievant may write his

own grievance. Dr. Schaal argues, that because President Fryett

did not respond in compliance with the policy, Dr. Schaal was

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denied his right under contract to have his grievance arbitrated.

FVCC contends Dr. Schaal had no right under the contract to

have his grievance arbitrated because he did not use the grievance

form mandated by Policy 930, Section 4. FVCC submits that Section

3 of the policy relates only to whether an employee chooses to seek

the assistance of the Personnel Office in submitting a grievance;

it does not obviate the requirement that the grievance form must be

used.

In addition, FVCC argues Dr. Schaal did not pursue his

grievance to the next step of the grievance procedure. Policy 930

provides, after a grievance has been submitted to the President and

not resolved, grievant may seek review of the President's decision

by the Board Personnel Committee and then by the Board of Trustees.

If the grievance is still not resolved, grievant may request

binding arbitration. FVCC points out Dr. Schaal did not file a

request seeking review of the President's decision by the Board

Personnel Committee. Therefore, FVCC concludes the grievance was

assumed resolved in accordance with FVCC's policies and there was

no obligation to arbitrate.

The District Court found Dr. Schaal did not comply with the

provisions of the grievance procedure in that he did not use the

required form, he did not set forth all information required by the

policy, and he did not take any action to move his request to

successive steps of the grievance procedure. The court concluded,

in light of Dr. Schaal's failure to comply with FVCC's grievance

procedure, FVCC did not have an obligation to arbitrate the

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,nonrenewal and so there was no breach of policy.

Our standard of review of findings of fact by the District

Court in a non-jury trial is set forth in Marriage of Brownell

(1993), 263 Mont. 78, 81-82, 865 P.2d 307, 309, as follows:

We review findings of fact by the district court to

determine if they are "clearly erroneous." In re Marriage

of Eschenbacher (19921, 253 Mont. 139, 142, 831 P.2d

1353, 1355. In Eschenbacher, we applied the three-part

test adopted in Interstate Production Credit Association

v. DeSaye (1991), 250 Mont. 320, 820 P.2d 1285. We will

review the record to determine if the findings are

supported by substantial evidence, and if there is

substantial evidence, we next determine if the district

court has misapprehended the effect of the evidence.

Even if there is substantial evidence and a proper

understanding of the evidence, we may yet declare a

finding clearly erroneous when it is clear and definite

that a mistake has been committed. See, Eschenbacher,

831 P.2d at 1355.

We review conclusions of law to determine whether

the district court's interpretation of the law was

correct. In re Marriage of Burris (1993), 258 Mont. 265,

852 P.2d 616, 619, 50 St. Rep. 525, 526.

Dr. Schaal did not utilize the grievance form required by

Policy 930 when he submitted his letter of grievance to President

Fryett. Additionally, we note President Fryett's response to Dr.

Schaal's letter of grievance made clear he would not suggest that

Dr. Schaal be reinstated. If Dr. Schaal did not view his grievance

as resolved at this point, he should have sought review by the

members of the Board Personnel Committee in accordance with Policy

930, Section 5.1.4. Dr. Schaal did not seek such review.

We conclude the District Court's finding that Dr. Schaal did

not comply with the provisions of the grievance procedure is

supported by substantial evidence and the District Court did not

misapprehend the effect of the evidence. We further conclude there

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is nothing to indicate a mistake has been committed. We therefore

conclude the District Court correctly applied the law when it ruled

FVCC had no obligation to arbitrate the nonrenewal of Dr. Schaal's

contract.

We hold the District Court did not err in dismissing Dr.

Schaal's claim that FVCC breached his employment contract.

II.

Did the District Court err in dismissing Dr. Schaal's claim

that FVCC breached the covenant of good faith and fair dealing?

Dr. Schaal refers to this Court's decision in Haines Pipeline

Construction, Inc. v. Montana Power Company (19911, 251 Mont. 422,

830 P.2d 1230, where we stated every contract contains an implied

covenant of good faith and fair dealing and a breach of that

covenant is a breach of the contract. Dr. Schaal argues FVCC's

failure to follow its own policies is a violation of the covenant

of good faith and fair dealing and thus a breach of the contract.

Dr. Schaal contends FVCC is under the supervision and

coordination of the Board of Regents, § 20-15-103, MCA. The Board

of Regents Policy Manual provides that employees employed for three

years must be given six months written notice of intent not to

renew their contracts. Dr. Schaal argues FVCC failed to follow

this policy when it gave him only sixteen days notice that his

contract would not be renewed. Dr. Schaal concludes FVCC's failure

to follow its own policies was a breach of the contract's covenant

of good faith and fair dealing.

In addition, Dr. Schaal claims he was a permanent employee

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,

according to FVCC's policy. The policy provides probationary

employees, those employed less than six months, may be discharged

without cause. Dr. Schaal argues, because he had been employed for

three years, far beyond the probationary period, he was a permanent

employee with a reasonable expectation of continued employment.

Dr. Schaal concludes that FVCC violated the covenant of good faith

and fair dealing by not renewing his contract when he reasonably

expected its renewal.

FVCC contends Dr. Schaal had never been a probationary

employee nor a permanent employee. FVCC claims he was a contract

employee and his contract had no renewal provisions. FVCC argues

Dr. Schaal had no reasonable expectation of employment beyond the

term of his contract. Therefore, FVCC did not breach the covenant

of good faith and fair dealing by not renewing Dr. Schaal's

contract.

Furthermore, FVCC argues the notice requirement of the Board

of Regents Policy does not apply here because the Board's policies

apply only to the Montana University System and FVCC is not a part

of that system. Therefore, FVCC was not obligated to give Dr.

Schaal notice of its intent to not renew his contract under that

policy; and so, it did not violate the covenant of good faith and

fair dealing.

In Talley v. Flathead Valley Community College (1993), 259

Mont. 479, 489, 857 P.2d 701, 707, we stated "the nature and extent

of the obligation of good faith and fair dealing is measured by the

justifiable exDectations of the parties." Presently, the District

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Court made the following finding of fact:

3. . . [Dr. Schaall signed a one year administrative

employment contract with a specific ending date of June

30, 1992. [FVCCl's policy is incorporated into that

contract by reference. However, [Dr. Schaall has

provided no evidence of a policy incorporated by

reference into the contract that would give [Dr. Schaal]

a reasonable expectation of continued employment after

the expiration of that employment contract, and no

evidence of any other basis for a reasonable expectation

of continued employment after the expiration of that

employment contract. [Dr. Schaal] was employed by [FVCC]

through June 30, 1992, the term set forth in the

Contract.

The record contains substantial evidence to support the District

Court's finding of fact. We further conclude there is nothing in

the record to indicate a mistake has been committed. Based on its

findings, the District Court reached the following conclusion of

law:

2 . [FVCCI did not violate policy or breach [Dr.

Schaal'sl employment contract when it determined that the

contract would not be renewed. The nature and extent of

the obligation of good faith and fair dealing is measured

by justifiable expectation of the parties. Since there

was no basis for a reasonable expectation of continued

employment beyond the term of [Dr. Schaal'sl contract,

[FVCCI did not violate the covenant of good faith and

fair dealing when it determined that [Dr. Schaal'sl

contract would not be renewed.

We agree.

We hold that the District Court did not err in dismissing Dr.

Schaal's claim that FVCC breached the covenant of good faith and

fair dealing

III.

Did the District Court err in dismissing Dr. Schaal's claim of

violation of due process?

Dr. Schaal refers to this Court's decision, in Boreen v.

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Christensen (1994), 267 Mont. 405, 884 P.2d 761, where we held a

public employee, who can establish a property interest in

employment, must be provided an opportunity to respond to the

notice of the employee's termination prior to that termination.

Dr. Schaal claims he had a property interest in his employment

based on FVCC's personnel policies -- the Board of Regents Policy

providing six months notice of nonrenewal and FVCC's policy

regarding probationary versus permanent employees. Therefore, he

claims FVCC violated Dr. Schaal's right to due process when it

denied to him an opportunity to properly respond prior to his

termination.

FVCC argues Dr. Schaal's right to due process was not violated

because he did not have a property interest in his employment.

FVCC cites to Board of Regents v. Roth (1972), 408 U.S. 564, 577,

92 S.Ct. 2701, 2709, 33 L.Ed.2d 548, 561, where the Court stated:

To have a property interest in a benefit, a person

clearly must have more than an abstract need or desire

for it. . . He must, instead, have a legitimate claim

of entitlement to it.

FVCC contends, for the reasons stated in Issue II, Dr. Schaal had

no reasonable expectation of continued employment; and, therefore,

he had no property interest in his employment beyond his contract's

termination date.

The District Court found no evidence of a policy which gave to

Dr. Schaal a right of employment after the expiration of his

employment contract. As a result, the District Court concluded

that Dr. Schaal did not have a property right in his employment.

The District Court held, since Dr. Schaal did not have a property

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right in his employment beyond the term of the employment contract,

FVCC did not deprive Dr. Schaal of property when it determined his

employment contract would not be renewed.

We conclude there is substantial evidence to support the

findings of fact of the District Court and we further conclude

there is nothing to indicate a mistake has been committed. We

agree with the District Court's conclusion that FVCC did not

deprive Dr. Schaal of property when it determined it would not

renew his contract.

We hold the District Court did not err in dismissing Dr.

Schaal's claim of violation of due process.

Affirmed.

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