Court Opinion

ID: 3009258
Source: CourtListenerOpinion
Date Created: 2015-10-12 19:15:48.458151+00
Date Added: 2024-06-11T09:51:10.671223
License: Public Domain

lit-   *,* I

       IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

 NIELS HVIDTFELDT,                                    No. 72846-6-

                     Appellant,                       DIVISION ONE

               v.

 SITRION SYSTEMS AMERICAS, INC.,                      UNPUBLISHED

                      Respondent.                     FILED: October 12, 2015

      Cox, J. — Niels Hvidtfeldt appeals the trial court's order granting Sitrion

Systems Americas Inc.'s motion for summary judgment. There are no genuine

issues of material fact whether he is entitled to post termination bonuses under

the terms of his employment agreement. Likewise, there are no genuine issues

of material fact whether Sitrion willfully withheld any bonuses in violation of RCW

49.52.050 because the parties had a bona fide dispute over this issue. Sitrion is

entitled to judgment as a matter of law. We affirm.

      This case is an employment agreement dispute between Hvidtfeldt and

Sitrion over post termination compensation. Specifically, this case involves the

success bonus portion of his compensation. At oral argument of this case,

Hvidtfeldt claimed this includes both a fourth-quarter segment bonus and an

annual segment bonus for the year 2012.
No. 72846-6-1/2

       The material facts are largely undisputed. Hvidtfeldt owns eRhapsody. In

March 2011, eRhapsody and Sitrion GmbH, Sitrion's parent corporation, entered

into a written cooperation agreement. Under this agreement, Hvidtfeldt was to

receive post termination commission payments. Sitrion GmbH eventually

terminated this agreement in 2011.

       In November 2011, Sitrion negotiated with Hvidtfeldt to hire him as its

general manager. Hvidtfeldt sent an e-mail to the president and chief executive

officer of Sitrion GmbH. In the e-mail, Hvidtfeldt stated that he was interesting in

working for Sitrion even if it meant "forfeiting substantial future and earned

commissions."1

       Hvidtfeldt also proposed including a tail clause in the employment

agreement, which provided for post termination bonuses. Sitrion GmbH rejected

Hvidtfeldt's proposal, stating:

       We believe the attached documents represent the final agreements
       .... [T]here is no post agreement tail and we have no
       intention to add one. As long [sic] you are with the company
       you will receive compensation, if you leave this ends. This is
       consistent with all similar agreements currently in place in the
       company.!2'

       Thereafter, the parties both signed the employment agreement without

any further modification. Later in this decision, we state the material terms of the

parties' final agreement.

       1 Clerk's Papers at 37.

       2]d. at 41 (emphasis added).
No. 72846-6-1/3

         Hvidtfeldt and Sitrion GmbH also executed an incentive agreement. This

agreement provides that the terms expire 12 months after termination of the

employment agreement, if Sitrion terminates the employment agreement without

cause.

         In September 2012, Sitrion's president terminated Hvidtfeldt's employment

as an at will employee.

         Hvidtfeldt sued Sitrion for breach of contract based on its refusal to pay

him any success bonuses for the period after his termination. He also claimed

that Sitrion violated the wage claim statute, RCW 49.52.050. He sought

damages and attorney fees for the alleged violation under RCW 49.52.070.

         Sitrion moved for summary judgment. The trial court granted the motion.

         Hvidtfeldt appeals.

                               BREACH OF CONTRACT

         Hvidtfeldt argues that the trial court erred by granting summary judgment

on his claim for breach of the employment agreement. We disagree.

         "Summary judgment is appropriate only when there is no genuine issue as

to any material fact and the moving party is entitled to judgment as a matter of

law."3 "A genuine issue of material fact exists if 'reasonable minds could differ on

the facts controlling the outcome of the litigation.'"4 This court considers "all facts

      3 Scrivener v. Clark Coll., 181 Wash. 2d 439, 444, 334 P.3d 541 (2014); See
also CR 56(c).

         4 Knight v. Dep't of Labor & Indus., 181 Wash. App. 788, 795, 321 P.3d 1275
(quoting Ranger Ins. Co. v. Pierce County, 164 Wash. 2d 545, 552, 192 P.3d 886
(2008)), review denied, 339 P.3d 635 (2014).
No. 72846-6-1/4

and make[s] all reasonable, factual inferences in the light most favorable to the

nonmoving party."5 "A material fact precluding summary judgment is a fact that

affects the outcome" of a dispute.6

       This court reviews de novo a trial court's grant of summary judgment.7

       "Washington continues to follow the objective manifestation theory of

contracts."8 When interpreting an agreement, this court attempts "to determine

the parties' intent by focusing on the objective manifestations of the agreement,

rather than on the unexpressed subjective intent of the parties. We impute an

intention corresponding to the reasonable meaning of the words used."9 The

parties' subjective intent is "generally irrelevant if the intent can be determined

from the actual words used" in the agreement.10 These words are given "their

ordinary, usual, and popular meaning unless the entirety of the agreement clearly

demonstrates a contrary intent."11 We interpret only what was written in the

agreement, not "what was intended to be written."12

       5 Scrivener, 181 Wash. 2d at 444.

      6 Garrison v. Sagepoint Fin., Inc., 185 Wash. App. 461, 484, 345 P.3d 792,
review denied, 183 Wash. 2d 1009 (2015).

       7 Scrivener, 181 Wash. 2d at 444.

      8 Hearst Commc'ns. Inc. v. Seattle Times Co., 154 Wash. 2d 493, 503, 115
P.3d 262 (2005).

       9 ]d_. (citation omitted).

       10 Id, at 504.

       11 \±

       12 Id.
No. 72846-6-1/5

       In Berg v. Hudesman,13 the supreme court "recognized the difficulties

associated with interpreting contracts solely on the basis of the 'plain meaning' of

the words in the document."14 Interpreting a contract "involves 'one person giving

a meaning to the symbols of expression used by another person.'"15 But "the

meaning of a writing 'can almost never be plain except in a context.'"16 The

supreme court adopted the "context rule" and recognized that the parties' intent

"cannot be interpreted without examining the context surrounding an instrument's

execution."17 Relevant extrinsic evidence to ascertain the parties' intent "may

include (1) the subject matter and objective of the contract, (2) all the

circumstances surrounding the making of the contract, (3) the subsequent acts

and conduct of the parties, and (4) the reasonableness of respective

interpretations urged by the parties."18

       Since Berg, the supreme court has "explained that surrounding

circumstances and other extrinsic evidence are to be used 'to determine the

meaning of specific words and terms used' and not to 'show an intention

       13115Wn.2d657, 801 P.2d 222 (1990).

       14 Hearst Commc'ns. Inc. 154 Wash. 2d at 502.

       15 id (alternation in the original) (internal quotation marks omitted)
(quoting Berg, 115 Wash. 2d at 663).

       16 \± (internal quotation marks omitted) (quoting Berg, 115 Wash. 2d at 668).

       17 Id.

       1£
            Id.
No. 72846-6-1/6

independent of the instrument' or to 'vary, contradict or modify the written

word.'"19

       But not all extrinsic evidence is admissible. For instance, "evidence of a

party's unilateral or subjective intent as to the meaning of a contract word or term

is inadmissible."20 And a party cannot use extrinsic evidence to "'vary, contradict

or modify the written word.'"21

       Here, the preliminary question is whether there are any genuine issues of

material fact for trial. Hvidtfeldt and Sitrion primarily dispute the meaning of the

language in the employment agreement. They do so, in part, by reference to

extrinsic evidence.

       The January 1, 2012 employment agreement includes the following

material terms and conditions:

       2. COMPENSATION
       Base Salary: For services provided, Employer will pay Employee an
       annual base salary of US$100,000 paid in accordance with
       Employer's annual payroll procedures. The Base Salary will
       increase to US$ 120,000 in fiscal year 2013.
       Success Bonus: In addition to the base salary the Employee
       will be receiving an annual variable compensation in the
       amount of US$180,000 (at 100% target achievement) per year
       to be paid upon achieving targets defined by the Board of the
       Employer. See Appendix 1 for the 2012 Bonus agreement.

       19 Id at 503 (emphasis omitted) (quoting Hollis v. Garwall. Inc., 137 Wash. 2d
683, 695-96, 974 P.2d 836 (1999)).

       20 Miller v. Kenny, 180 Wash. App. 772, 792, 325 P.3d 278 (2014) (emphasis
omitted).

       21 id at 793 (quoting Hollis. 137 Wash. 2d at 695).
No. 72846-6-1/7

         The Success Bonus increases to US$ 230,000 (at 100% target
         achievement) in fiscal year 2013.[22]

         Moreover, the same agreement also states:

         14. CONTINUING OBLIGATIONS
         Notwithstanding the termination of Employee for any reason, the
         provisions of paragraph 5, 6, 7, 9, and 13 of this Agreement will continue
         in full force and effect following such termination.[23]

         19. ENTIRE AGREEMENT
         This Agreement constitutes the entire agreement between the
         Parties and supersedes any prior understanding or representation
         of any kind preceding the date of this Agreement. There are no
         other promises, conditions, understandings or other agreements,
         whether oral or written, relating to the subject matter of this
         Agreement. This Agreement may be modified in writing and must
         be signed by both Employee and Employer.[24]

         Hvidtfeldt does not argue that there are any other "promises, conditions,

understandings or other agreements, whether oral or written" that alter the terms

of this written agreement under paragraph 19.25 Rather, he rests his challenge

on the written agreement itself and extrinsic evidence concerning its context.

Because the parties do not dispute the language in the employment agreement

or the relevant extrinsic evidence, there are no genuine issues of material fact for

trial.

         22 Clerk's Papers at 30 (emphasis added).

         23 id at 32.

         24 id at 32-33.

         25 Id. at 33.
No. 72846-6-1/8

       Thus, our primary focus is on determining whether Sitrion is entitled to

judgment as a matter of law. To do so, we focus on the objective manifestation

of the parties, as expressed in their written employment agreement. Doing so

here, we conclude that the only reasonable interpretation of the compensation

paragraph is that no success bonuses are payable to Hvidtfeldt after the

termination of his employment.

       Paragraph 14 of the agreement specifies what portions of the agreement

survive "the termination of [Hvidtfeldt] for any reason."26 A straightforward

reading of the plain words of this paragraph make clear that only certain

numbered paragraphs of the agreement continue in full force and effect following

his termination. Notably, paragraph 2—the compensation paragraph—is not

among them. Thus, the entire compensation paragraph, which includes both

base salary and success bonuses, does not survive the termination of his

employment. That is the parties' clear objective manifestation as to the subject

of compensation.

       To the extent there is any need to consider extrinsic evidence, that

evidence is consistent with this reading of the agreement. The e-mail

communication between Hvidtfeldt and Sitrion GmbH's president during the

negotiations that preceded the execution of the employment agreement by both

parties confirms this reading.

       26 Id. at 32.
No. 72846-6-1/9

       This communication shows that Hvidtfeldt understood that Sitrion GmbH

rejected his proposal to modify the proposed agreement to include any bonuses

after he was no longer employed by the company. In fact, Hvidtfeldt's

declaration acknowledges that Sitrion "rejected my proposal that I receive tail

compensation following . . . termination of the Employment Agreement."27 Thus,

the parties purposefully excluded a post termination bonus provision from the

employment agreement.

       Other extrinsic evidence further supports our reading. The parties' other

agreements also demonstrate their intent to exclude post termination bonuses in

the employment agreement. The cooperation and incentive agreements both

explicitly provided circumstances where Hvidtfeldt would receive post termination

compensation. But the employment agreement lacks such language. Further, it

explicitly states that only certain paragraphs of the agreement, not including

compensation, survived termination of his employment. This demonstrates that

the parties intentionally excluded post termination bonuses from the employment

agreement.

       In sum, the agreement's language, together with extrinsic evidence, show

that Hvidtfeldt is not entitled to post termination bonuses. Thus, Sitrion is entitled

to judgment as a matter of law.

       Hvidtfeldt argues that the language in the employment agreement

unambiguously provides that he will be paid a bonus if certain conditions are met.

       27 Id. at 83.
No. 72846-6-1/10

We are not persuaded by any of his arguments. Further, Hvidtfeldt's second,

third, and fourth arguments are not supported by any citation to authority.

Accordingly, we need not consider them.28

       First, Hvidtfeldt asserts that neither the employment agreement nor the

appendix to the agreement state that his continued employment with Sitrion is a

condition to receiving a bonus. In making this argument, Hvidtfeldt focuses on

the words "will be receiving" and "to be paid" to argue that payment of the

bonuses is mandatory if Sitrion meets its goals.29 As previously stated, the entire

compensation paragraph includes both base salary and success bonus

provisions. He compares the base salary language to the success bonus

language to argue that his continued employment is not a condition to receiving

bonuses. He argues that while the base salary language states that his salary is

"[f]or services provided," the success bonus provision does not include similar

conditional language.30

      This argument is unpersuasive because he takes words in the agreement

out of context to support his argument. This argument does nothing to undercut

our prior discussion that the plain words of paragraph 14 of the agreement show

that his compensation does not survive the termination of his employment. And

the extrinsic evidence is consistent with this reading. The essence of his

      28 See Darkenwald v. Emp't Sec. Dep't, 183 Wash. 2d 237, 248, 350 P.3d
647 (2015); see also RAP 10.3(a)(6).

      29 Clerk's Papers at 30.

      30 jd; Appellant's Opening Brief at 14.

                                            10
No. 72846-6-1/11

argument takes words out of context to conflict with the plain words we have

discussed. The controlling case authority that we discussed earlier in this

opinion bars that approach.

       Further, his argument is inconsistent with his actions. The compensation

paragraph covers both base salary and success bonuses. Yet he only seeks in

this action success bonuses, not a continuation of base salary. If the

compensation paragraph survived termination of his employment, to be

consistent with his theory of this case, he would be seeking both continued base

pay and success bonuses. He is not.

      Second, Hvidtfeldt argues that the parties "would have said so" if they

intended to condition the bonuses on Hvidtfeldt's continued employment.31

Hvidtfeldt uses the employment offer he wrote, which explicitly excludes post

termination bonuses, to support his argument.

      As general manager, Hvidtfeldt sent an employment offer letter to Dean

Read. This letter provides that "[c]ommissions will only be paid on recognized

sales up to and including effective date of termination. Bonuses will not be paid

pro-rata; they must be earned in full prior to termination."32
       But the continuing obligations paragraph makes unnecessary any

separate statement conditioning bonuses on his continued employment. In any

event, a subsequent employment offer to another employee that contains explicit

conditional language does not change the fact that the parties' purposefully

       31 Appellant's Opening Brief at 13.

       32 Clerk's Papers at 58.
                                              11
No. 72846-6-1/12

excluded a post termination bonus provision from Hvidtfeldt's employment

agreement. In sum, the lack of explicit conditional language does not show that

the employment agreement entitles Hvidtfeldt to bonuses after the termination of

his employment.

       Third, Hvidtfeldt argues that the continuing obligation paragraph is

consistent with Sitrion's obligation to pay him post termination bonuses. He

argues that this paragraph only applies to his obligations to Sitrion, not Sitrion's

obligations to him. We disagree.

       Although this paragraph provides only his specific continuing obligations

that survive the termination of his employment, it does not negate the conclusion

that the agreement otherwise ends at the termination of his employment. None

of the enumerated paragraphs stated in paragraph 14 include paragraph 2—the

compensation paragraph. Thus, obligations under paragraph 2 ended at his

termination of employment.

       Fourth, Hvidtfeldt argues that Sitrion terminated only his employment, not

the employment agreement. He claims that termination of his employment "does

not sever the Employment Agreement for purposes of payment of the Success

Bonus."33

       This argument is not persuasive and makes no sense. It is undisputed

that Sitrion terminated Hvidtfeldt's employment in September 2012. Save for the

specified paragraphs, the agreement ended at that time. For the reasons we

       33 Appellant's Reply Brief at 5.

                                              12
No. 72846-6-1/13

stated previously in this decision, paragraph 14 does not include within its plain

terms the compensation paragraph on which he relies. Thus, his compensation

ended at the termination of his employment, both base salary and special

bonuses. That other specified paragraphs of the agreement survived is

immaterial.

       Fifth, Hvidtfeldt argues that the email from Sitrion GmbH's president is not

material because he did not leave Sitrion. To the contrary, we believe it is highly

relevant as extrinsic evidence to assist in the interpretation of words in the

agreement.

       The e-mail states, "[a]s long [sic] you are with the company you will

receive compensation, ifyou leave this ends."34 Hvidtfeldt focuses on the words

"if you leave," arguing that they refer to quitting his employment.35 He argues

that because Sitrion terminated him, he is entitled to post termination bonuses.

       But Hvidtfeldt interprets this wording too narrowly. The common meaning

of "leave" is "depart."36 Neither that common meaning nor the context here

requires the narrow reading he seeks to impose on this wording. In short, the

fact that his employer initiated the termination is not material.

       34 Clerk's Papers at 41.

       35 Id.

       36 The American Heritage Dictionary (5th ed. 2015),
https://www.ahdictionary.com/word/search.html?q=leave.

                                              13
No. 72846-6-1/14

       Hvidtfeldt attempts to support his argument by stating that his

understanding is consistent with the parties' "course of dealings," referring to the

cooperation and incentive agreements.37 This argument is flawed.

       "Course of dealings is 'a sequence of previous conduct between the

parties to an agreement which . . . establishes] a common basis of

understanding for interpreting their [agreement].'"38 "[A] course of dealing does

not override express terms of a contract or add additional obligations, but

rather, is a tool for interpreting the provisions of a contract. If an agreement and

an applicable course of dealing are inconsistent with one another. . . then the

express terms control."39

       Here, even assuming the cooperation and incentive agreements are

courses of dealing, a course of dealing cannot add additional obligations to the

parties' agreement. Thus, post termination compensation provisions in the

cooperation and incentive agreements do not add the additional obligation of

post termination bonuses to the employment agreement.

       Lastly, Hvidtfeldt argues that the e-mail from Sitrion GmbH's president is

inadmissible extrinsic evidence because it varies, contradicts, and modifies the

terms in the employment agreement. It does no such thing.

       37 Appellant's Opening Brief at 24.

       38 City of Tacoma v. City of Bonnev Lake, 173 Wash. 2d 584, 590, 269 P.3d
1017 (2012) (alteration in the original) (internal quotation marks omitted) (quoting
Puget Sound Fin.. LLC v. Unisearch, Inc., 146 Wash. 2d 428, 436, 47 P.3d 940
(2002)).

       39 Seattle-First Nat'l Bank v. Westwood Lumber. Inc., 65 Wash. App. 811,
819, 829 P.2d 1152 (1992) (emphasis added) (citation omitted).
                                             14
No. 72846-6-1/15

       The e-mail does not vary, contradict, or modify the terms of the

agreement. Instead, it explains why the prospective employment agreement that

was to be signed by the parties does not contain a post termination bonus

provision. This is consistent with the plain words of the agreement.

                      WILLFUL WITHHOLDING OF WAGES

        Hvidtfeldt next argues that the trial court erred by dismissing on summary

judgment on his claim for willful withholding of wages. Because there was a

bona fide dispute over payment of bonuses, we disagree.

        RCW 49.52.050 prohibits employers from "wilfully" depriving employees of

wages.40 "[B]onuses . . . paid for work performed!] are wages."41 RCW
49.52.070 outlines civil liability for willfully withheld wages. "The critical, but not

stringent, prerequisite to liability is that the employer's . . . failure to pay wages

was 'willful.'"42

        The word "willful" means that an act "is volitional."43 An employer

withholds wages willfully if "it is the result of knowing and intentional action rather

than mere carelessness."44 "But a 'bona fide' dispute between the employer and

        40 RCW 49.52.050(2).

        41 LaCoursiere v. Camwest Dev., Inc., 181 Wash. 2d 734, 741, 339 P.3d 963
(2014); see also RCW 49.46.010(7).

       42 Failla v. FixtureOne Corp.. 181 Wash. 2d 642, 655, 336 P.3d 1112(2014),
cert, denied sub nom., Schutzv. Failla, 135 S. Ct. 1904 (2015).

        43 Snooualmie Police Ass'n v. City of Snooualmie, 165 Wash. App. 895, 908,
273 P.3d 983 (2012).

        44 Moore v. Blue Frog Mobile, Inc., 153 Wn. App. 1,8,221 P.3d913
(2009); accord Failla, 181 Wash. 2d at 655.
                                               15
No. 72846-6-1/16

employee regarding the wages can negate a finding of willfulness."45 "A bona

fide dispute is a 'fairly debatable' dispute over whether all or a portion of wages

must be paid."46

       The employer bears the burden of showing a bona fine dispute.47 "'An

employer's genuine belief that he is not obligated to pay certain wages precludes

the withholding of wages from falling within the operation of RCW 49.52.050(2)

and 49.52.070.'"48 The issue is whether the employer's "asserted belief. . . was

reasonable enough to create a bona fide dispute. It does not matter if. . . [the

employer's] interpretation of the . . . clause is erroneous."49 "Usually wilfulness is

a question of fact, but. . . summary judgment is proper as a matter of law if the

evidence supports a single reasonable conclusion."50

       Here, Sitrion did not willfully withhold bonuses from Hvidtfeldt because a

bona fide dispute exists regarding the payment of bonuses. As discussed earlier,

Hvidtfeldt is not entitled to post termination bonuses under the employment

       45 Moore, 153 Wash. App. at 8; accord Wash. State Nurses Ass'n v. Sacred
Heart Med. Ctr.. 175 Wash. 2d 822, 834, 287 P.3d 516 (2012).

       46 Wash. State Nurses Ass'n, 175 Wash. 2d at 834 (internal quotation marks
omitted) (quoting Schilling v. Radio Holdings. Inc.. 136Wn.2d 152, 161, 961 P.2d
371 (1998)).

       47
            Id.

       48 Duncan v. Alaska USA Fed. Credit Union. Inc.. 148 Wash. App. 52, 79,
199 P.3d 991 (2008) (quoting Ebling v. Gove's Cove. Inc.. 34 Wash. App. 495, 500,
663P.2d 132(1983)).

       49 Moore, 153 Wash. App. at 8.

       50 Failla, 181 Wn.2dat655.

                                              16
No. 72846-6-1/17

agreement. Thus, it is at least "'fairly debatable'" that Sitrion did not owe

Hvidtfeldt any further bonuses.51 Accordingly, Sitrion satisfied its burden of

establishing a bona fide dispute, even viewing the facts in the light most

favorable to Hvidtfeldt.

       In sum, Sitrion did not willfully withhold Hvidtfeldt's wages. Summary

judgment was proper.

       Hvidtfeldt argues that Sitrion failed to establish a bona fide dispute. But

Sitrion's reasonable asserted belief that Hvidtfeldt was not entitled to post

termination bonuses satisfied its burden.

       We affirm the summary judgement order.
                                                           6ah^.

WE CONCUR:

   l/Sokr v| j             T

       51 Wash. State Nurses Ass'n, 175 Wash. 2d at 834 (internal quotation marks
omitted) (quoting Schilling. 136 Wash. 2d at 161).
                                              17