Court Opinion

ID: 9853376
Source: CourtListenerOpinion
Date Created: 2023-09-24 05:47:27.125636+00
Date Added: 2024-06-11T09:22:46.447095
License: Public Domain

WUEST, Retired Justice
(dissenting).
SINCE DLORAH CONTROLLED AND DIRECTED JOHNSTON’S EMPLOYMENT AT ALL RELEVANT TIMES, THE TRIAL COURT’S CONCLUSION THAT JOHNSTON’S PROBATIONARY STATUS WAS REINSTATED, PERMITTING HER TO BE TERMINATED WITHOUT JUST CAUSE AND CONTRARY TO THE EMPLOYEE HANDBOOK, WAS IMPROPER.
Johnston’s employment with DLORAH was terminated on September 26, 1991. However, Johnston’s position was not eliminated as she was informed her replacement would take over the following morning. Chapter 12 of the employee handbook, on which the majority relies to support its holding, provides for the elimination of exempt positions as deemed necessary by National College’s president or board of directors. Since Johnston’s position was not eliminated, chapter 12 does not govern her termination without just cause. The “just cause” language in chapter 13 governing terminations is non-restrictive and refers generally to “employees,” thereby including Johnston in its protections. Any ambiguity between these chapters should be construed against the drafter of the handbook, DLORAH. “[0]ne who speaks or writes a contract can by exactness of expression more easily prevent mistakes in meaning than one with whom he is dealing, therefore any doubts arising from ambiguity of language are resolved in favor of the latter.” Enchanted World Doll Museum v. Buskohl, 398 N.W.2d 149, 152 (S.D.1986); Williston on Contracts § 621 (3d ed. 1961); see Hicks v. Brookings Mall, Inc., 353 N.W.2d 54, 56 (S.D.1984).
In reviewing a grant of summary judgment, we view the evidence most favorably to the nonmoving party and resolve reasonable. doubts against the moving party. Lamp v. First Nat’l Bank of Garretson, 496 N.W.2d 581, 583 (S.D.1993). “The burden of proof is upon the movant to show clearly that there is no genuine issue of material fact and that he is entitled to judgment as a matter of law.” State, Dep’t of Revenue v. Thiewes, 448 N.W.2d 1, 2 (S.D.1989). We should reverse the trial court’s grant of summary judgment because DLORAH failed to show there are no genuine issues of material fact.
A more complete review of the facts is necessary to understand what occurred in this case. Just prior to Johnston’s hire date, DLORAH entered into a purchase/lease agreement with LTC. This agreement allowed LTC to purchase the name of the college, some unemployment reserve account balances, and classroom, maintenance, and dormitory equipment for $1 million. DLO-RAH and LTC would jointly control National College operations for approximately one month, until July 6, 1990, at which time the bill of sale was delivered to LTC. Any conflict between the parties during this period of joint control would be resolved by DLORAH. Under the parties’ agreement, LTC leased the real estate and certain equipment and inventory at the main campus in Rapid City from DLORAH and subleased real estate and equipment and inventory at the branch campuses from DLORAH.
The parties agreed that “ownership and operation of the going business known as National College” j^ould be tied to the leased properties and LTC would not sell, assign, or mortgage the property. LTC further agreed that it would use the property and conduct college business utilizing the same methods DLORAH had used since 1988. Under the parties’ agreement, DLORAH even dictated the college accreditation process to be used. *205If LTC defaulted, liquidated damages of $11 ' million would be satisfied by DLORAH taking immediate possession of all properties leased or sold under the agreement. LTC was given an option to purchase all leased property for $11 million, and an escape provision allowed LTC to terminate the agreement for any reason. In the event of such termination, all property sold under the agreement would revert back to DLORAH at the end of the current academic quarter.
In October 1990, LTC replaced many administrators at the college but Johnston’s position remained unaffected. Effective January 1, 1991, six months after receiving the bill of sale, LTC exercised the escape provision to terminate the purchase/lease agreement and entered into a second agreement with DLORAH. Under this new agreement, day-to-day management of National College was returned to DLORAH pending the end of the academic quarter, May 81, 1991, at which time title to the purchased property would revert back to DLORAH as well. LTC’s remaining interest in the property during this period was liability for profit or loss of the going business.
DLORAH brought back many of its administrators who had been replaced by LTC’s administrators in October. DLO-RAH’s Director of Administration and Per-' sonnel for National College advised Johnston, upon Johnston’s inquiry, that National College’s March 1987 employee handbook governed employee matters while the management agreement was in effect.1 As a result of this advice, Johnston relied on the 1987 handbook in managing employees under her direction and in her own employment relationship with DLORAH. Nine months after resuming full management of National College, DLORAH terminated Johnston giving rise to this lawsuit.
Johnston argued that, according to the terms of the employee handbook, she could not be terminated without just cause. DLO-RAH gave no reason for Johnston’s termination and stated it was not obligated to do so, claiming Johnston was an at-will employee, or that she became a probationary employee when title to the school’s property reverted back to DLORAH on May 81, 1991. Probationary employees, under the terms of the handbook, can be terminated with or without cause at any time during their six-month probationary period. The trial court found the handbook constituted a contract of employment between DLORAH and Johnston, that Johnston’s position had not been eliminated, but that Johnston was a probationary employee at the time of termination.
The question is whether the sale/lease and subsequent reacquisition reinstated Johnston’s probationary employee status. DLO-RAH’s employee handbook states that non-faculty employees are probationary for the first six months of employment. DLORAH argues that Johnston became a probationary employee of DLORAH’s once again when DLORAH reacquired title from LTC on May 31, 1991. According to DLORAH, it could then terminate Johnston’s employment within six months without cause. However, there is no evidence to indicate that DLORAH’s agreement with LTC had any effect on DLO-RAH’s employment contract with Johnston, or, that the subsequent return of property to DLORAH would reinstate Johnston’s probationary status.
“The relation of employer and employee arises out of contract, and the existence of an employment contract, express or implied, is essential to an employer-employee relationship.” 30 C.J.S. Employer-Employee § 7 (1992); Baker v. Jackson, 372 N.W.2d 142, 147 (S.D.1985). This rule has also been addressed in relation to successor employers. Yoselowitz v. People’s Bakery, Inc., 201 Minn. 600, 277 N.W. 221 (Minn.1938). “The relation of employer and employee is contractual ... and that contract of employment cannot be changed so as to substitute a new employer without the employee’s knowledge and consent.” Yoselowitz, 277 N.W. at 223 (citations omitted). The gist of this rule was stated by Justice Cardozo in Murray v. Union Railway Co. of N.Y. City, 229 N.Y. 110, 127 N.E. 907 (N.Y.1920): “The new relation cannot be thrust upon the servant without *206knowledge or consent.” Murray, 127 N.E. at 907.
As regards the sale or transfer of a business to a successor employer, courts have held the master-servant relationship does not necessarily terminate by the sale and transfer by the master to a third person of the property and business in connection with which the relation arose and exits. Benson v. Lehigh Valley Coal Co., 144 N.W. 774, 775 (Minn.1914). “[T]he authorities are clear that the original employer continues liable to the employees who have no notice of the change” and the burden is on the employer to show knowledge on the part of the employee. Benson, 144 N.W. at 775. Courts have also recognized that a new master cannot be foisted upon a servant unwittingly and the right to select one’s employer is implicit in the freedom from involuntary servitude. Darvell v. Paul A. Laurence Co., 239 Minn. 55, 57 N.W.2d 831, 834 (1953). “An employer may loan his employee to another so that for the time being the employee becomes the servant of the latter, but this can be done only with the employee’s assent.” Darvell, 57 N.W.2d at 834 (quoting Crawford v. Duluth, Missabe & Iron Range R. Co., 220 Minn. 225, 19 N.W.2d 384, 387 (Minn.1945).2
In the instant case, ownership of all real property remained with DLORAH throughout its relationship with LTC, National College continued as an ongoing business under the same name, Johnston’s office remained at the same location and she remained under the same employee benefit system. At all times, National College’s employee handbook, which underwent no revisions during LTC’s brief tenure, governed DLORAH’s and Johnston’s employment relationship. Language in the handbook limited DLO-RAH’s ability to terminate Johnston except for just cause. There is no evidence that Johnston consented to terminate her employment with DLORAH and become a new employee of LTC’s. Without this consent, Johnston could not be terminated by the purehase/lease agreement DLORAH made with LTC, a stranger to the contractual employment relationship existing between DLO-RAH and Johnston.
Furthermore, the record indicates DLO-RAH treated its employment relationship with Johnston as if it were continuing without effect from the terms of its agreement with LTC. Specifically, Johnston’s status regarding her accrued employment benefits underwent no change when DLORAH reacquired management and, subsequently, title to National College from LTC. Johnston’s employment as director of the Sioux Falls branch of the college continued uninterrupted from her hire date of June 18, 1990 until she was terminated by DLORAH September 26,1991, a period of just over fifteen months. DLORAH’s intent of uninterrupted employment is shown by a memo to Johnston dated April 1, 1991, i.e., during the interim period in which DLORAH was managing the college but prior to the date title reverted back. The memo indicates Johnston has twenty-four hours of accrued leave “for the 13 months (November 1, 1990 through Novem*207ber 30, 1991).”3 The practice of carrying over Johnston’s accrued leave time is inconsistent with DLORAH’s claim that Johnston was a “new employee” on probation.
Basic principles of equity also support reversal of summary judgment for DLORAH. DLORAH informed Johnston in January 1991 that the National College handbook governed the interim period of management, informed Johnston of her accrued annual leave, and distributed to Johnston in June 1991 (after DLORAH had reacquired title) an updated (but unchanged in relevant part) employee handbook, all without mentioning to Johnston a reinstatement of her probationary period, and DLORAH should be es-topped from terminating Johnston based on a probationary period. “[T]he authorities make it abundantly clear that an estoppel may arise under certain circumstances from silence or inaction as well as from words or actions.... The principle underlying such estoppels is embodied in the maxim ‘one who is silent when he ought to speak will not be heard to speak when he ought to be silent.’ ” In Estate of Williams, 348 N.W.2d 471, 476-77 (S.D.1984) (quoting 28 Am.Jur.2d Estoppel and Waiver § 53 (1966).
Johnston was told by DLORAH’s Personnel Director in January 1991 that DLO-RAH’s employee handbook governed her employment relations with the school.4 In Hayes v. Battle Creek Power Co., 249 N.W. 629, 630, 61 S.D. 385, 387 (1933), an action for wages where the defendant denied being the employer, we stated the test to be applied was under whose control and direction the employee was working. Our decision in Hayes was subsequently cited by the Eighth Circuit Court of Appeals:
When the relation of master and servant has existed up to a certain time, but it is claimed that such relation has ceased and been transferred to a third person, one of the tests is ‘whether or not the servant by mutual agreement terminated his employment, ceased to be under the control and orders of the former master, renounced obedience to such master, and knowingly and willingly subjected himself to the orders of another under a new agreement with a new master.’ The servant has a right to know for whom he works and of an attempt to enforce a change of masters. The power of control and direction is usually the deciding factor in ascertaining for whom the servant was working. The substitution of a new master must be by agreement with the servant.
(citations omitted). Marion Steam Shovel Co. v. Bertino, 82 F.2d 541, 547-48 (8th Cir.1936). Though Marion Steam Shovel Co. dealt with the “loaned servant doctrine,” the reasoning is applicable here. At no time did Johnston terminate her employment with DLORAH and agree to work for LTC. At all relevant times, Johnston worked under DLORAH’s direct control and direction. Even if one could accept DLORAH’s argument and find that a new probationary period had begun, it would have started in January 1991 when DLORAH took over the daily management of the school pending receipt of title at the end of the academic quarter. This is a full nine months before DLORAH terminated Johnston’s employment without cause and without warning.
I refuse to condone what appears to be a “shell game” using National College employees and, therefore, I dissent.
Sabers, J., joins this dissent.

. The termination provisions in the 1987 and 1990 handbooks are identical.

. In Yoselowitz, the court found such assent to new employment where the first employer’s bakery went out of business, another bakery was started at a new location bearing a new sign, and the employee went to the new business location to apply for and secure employment. Yoselowitz, 277 N.W. at 223. The two businesses had been separate corporations but had combined to form a new corporation prior to the employee’s cause of action against his employer. The question before the court was by whom was the employee employed. The court found that the employee had consented to employment with the new corporation and could only recover, if at all, from the new corporation. Id.
In contrast, the Supreme Court of Iowa found no consent by the employee to employment by a new employer in Janda v. Iowa Indus. Hydraulics, Inc., 326 N.W.2d 339, 343 (Iowa 1982).
The Janda facts are similar to the present situation. In Janda, the two employers were a parent and a subsidiary corporation. The subsidiary was incorporated shortly after Janda had been hired. The court distinguished Yoselowitz on its facts and held the evidence did not support a finding that the parties considered Janda's employment with the parent corporation terminated by a new contract with the subsidiary. Janda, 326 N.W.2d at 343. Specifically, the court noted that although the subsidiary corporation signed the employee's paycheck, the employee remained insured under the parent corporation's group health plan, received stock certificates from the parent corporation, maintained his office at the parent plant, and that all real estate and auto leases remained owed by the parent corporation. Janda, 326 N.W.2d at 343.

. LTC and DLORAH each held tide to National College property at times included in this thirteen-month period.

. This is the same handbook which gave Johnston her contractual right not to be terminated without just cause. There was no information in the handbook alerting National College employees that a new probationary period could start at any time other than an initial hire date. Likewise, there was no indication in the handbook that the sale/lease and reacquisition of National College would affect Johnston’s contractual relationship with DLORAH.