Watters v. City of Billings

08/28/2017

DA 16-0594
Case Number: DA 16-0594

IN THE SUPREME COURT OF THE STATE OF MONTANA
2017 MT 211

ERNIE WATTERS, et al., and all others similarly situated,

Plaintiffs and Appellees,

v.

CITY OF BILLINGS,

Defendant and Appellant.

APPEAL FROM: District Court of the Thirteenth Judicial District,
In and For the County of Yellowstone, Cause No. DV 09-43
Honorable Brenda R. Gilbert, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

James H. Goetz, Goetz, Baldwin & Geddes, P.C., Bozeman, Montana

W. Anderson Forsythe, Afton E. Ball, Moulton Bellingham P.C.,
Billings, Montana

For Appellees:

L. Randall Bishop, Bishop & Heenan, Billings, Montana

Lawrence A. Anderson, Attorney at Law, Great Falls, Montana

Submitted on Briefs: May 3, 2017

Decided: August 28, 2017

Filed:

__________________________________________
Clerk
Justice Jim Rice delivered the Opinion of the Court.

¶1 Appellant City of Billings (City) appeals the orders and judgment of the Thirteenth

Judicial District Court, Yellowstone County, holding the City incorrectly paid “longevity”

wage benefits under successively negotiated Collective Bargaining Agreements (CBAs),

and awarding damages to Appellees Ernie Watters, et al., and all others similarly situated

(Officers). The City raises six issues, but we reverse and remand for further proceedings

on the issue stated below, and do not address the additional issues:

Did the District Court err by holding the CBAs were unambiguous and excluding
extrinsic evidence concerning interpretation of those agreements?

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Officers are current and retired police officers, and members of the Montana Public

Employees Association-Billings Police (Union). The Union, on behalf of the Officers,

collectively bargains with the City to adopt an agreement governing the terms of the

Officers’ employment. The central dispute in this case is the correct interpretation of the

longevity pay provisions in the 2000-2003, 2003-2006, and 2006-2009 CBAs entered by

the City and the Union. Those provisions stated, in full:

2000-2003 CBA:

Longevity shall be added to each officer’s hourly rate based upon the
following formula:

.45 x .01 x the hourly rate of an officer at the beginning of year 1 x
years of service.

2003-2006 CBA:

Beginning July 1, 2003, longevity shall be added to each officer’s
hourly rate based upon the following formula:
2
 .45 x .01 x the hourly rate of an officer from year 1 to 15 years of
service.

.50 x .01 x the hourly rate of an officer after year 15.

2006-2009 CBA:

(Same language as in the 2003-2006 CBA, but with nearly
appropriately corresponding dates.)

¶3 The City paid longevity pay to the Officers in accordance with its understanding of

the contractual formula provided in the 2000-2003 CBA, including the language “x [or,

times] the hourly rate of an officer at the beginning of year 1 x [times] years of service.”

The internal wording, “the hourly rate of an officer at the beginning of year 1,” placed

between two multiplication signs, was read by the City as a singular phrase that set the base

wage to be used in the calculation, that being an officer’s hourly wage rate “at the beginning

of year 1.” Further, the City understood the phrase coming after the second multiplication

sign, “years of service,” also provided in the 2000-2003 CBA, to mean years that an officer

had actually served or completed. For example, the City would calculate longevity pay for

an officer beginning his or her sixth year of employment based upon five years of

completed service. Even though the phrase “at the beginning of year 1,” and the multiplier

based on “years of service,” were not included in the 2003-2006 and 2006-2009 versions

of the CBA, the City continued to calculate longevity pay pursuant to these terms, believing

it had agreed with the Union to do so, and thus paid this longevity benefit over the entire

period in dispute. The Union agreed with this calculation and is not a party in this

proceeding.

3
¶4 The Officers filed suit in 2009, claiming the City had incorrectly calculated

longevity pay under the CBAs. Specifically, the Officers claimed that the CBA required

the City to pay “accumulated longevity enhancements.” The Officers claimed that, instead

of basing longevity on an officer’s hourly wage rate at the beginning of year 1, the City

was required to cumulatively “add longevity increases to each police officer’s hourly rate”

in order to calculate the “full longevity increase owed.” The Officers claimed other

damages associated with their longevity claim, including retirement contributions. The

Officers asserted that the longevity provisions of the CBAs were “complete and

unambiguous, and none of these provisions requires the introduction of extraneous

evidence in order to interpret them.” Officers requested, and the District Court certified,

the matter as a class action.

¶5 The City answered, asserting it had initially paid and thereafter continued to pay the

longevity benefit as negotiated with the Union under the CBA. Noting the changes in

language in the successive CBAs, the City specifically denied Officers’ assertion that the

longevity provisions were unambiguous, and affirmatively asserted “that the introduction

of extrinsic evidence is necessary to interpret them.” Further, in a counterclaim, the City

noted that later versions of the CBA had eliminated the multiplier for an officer’s years of

service and, pursuant to the Officers’ assertion that the CBAs were unambiguous and

amenable to a plain reading, the City had overpaid longevity to the Officers and, under

such a reading, would be entitled to a refund. The District Court dismissed the City’s

4
counterclaims as a matter of law, reasoning that they were dependent upon extrinsic

evidence that was inappropriate to consider.

¶6 Officers moved for summary judgment on their claims and, in response to Officers’

accumulation theory, the City cited Raw v. City of Helena, 139 Mont. 343, 347, 363 P.2d

720, 722 (1961), for the proposition that “it is to the base salary and not to the base salary

plus longevity that longevity is added.” However, the District Court did not expressly

address the Officers’ accumulation theory, but rather focused on whether the CBAs were

subject to a plain reading, reasoning that “[t]he Court finds that the language, ‘longevity

shall be added to each officer’s hourly rate. . .’ is clear, unambiguous, and easily

understandable. It is not ambiguous nor reasonably subject to two different

interpretations.” (Emphasis original.) Rejecting the City’s argument that extrinsic

evidence was necessary to properly understand the longevity provisions of the contracts,

the District Court ruled that “[t]here can be no reasonable argument that the [CBAs] and

the attachments thereto plainly state and mean anything other than that longevity shall be

added to each officer’s hourly rate. . . . There is no need for extraneous or parol evidence.”

(Emphasis in original.)

¶7 Then, the District Court, in a few sentences at the end of its order, offered

determinative examples about how longevity was to be calculated under the CBAs, and in

so doing incorporated calculation issues that had not been pleaded or briefed by the parties,

stating as follows:

As an example, in 1994, an officer who is in his 11th year of service would
calculate his longevity addition according to the formula:
5
 .45 x .01 x $10.8898 x 11 = .539

For the same officer, who in 1995 would be in his 12th year of service, the
longevity addition would be:

.45 x .01 x $11.2709 x 12 = .609

Although offering equations, the District Court did not reference any language in the CBAs

or discuss any governing legal principles to explain its determination of the components

therein, including its use of a years-of-service multiplier for periods when the CBAs

included no multiplier, or, critically, its implied rejection of the City’s long use of

completed years of service in that multiplier. It did not analyze the specific language

differences in the successive versions of the CBAs or the City’s use of the contractual

phrase “the hourly rate of an officer at the beginning of year 1” to calculate the base wage

in the formula. The District Court simply reasoned that the CBAs “are complete,

unambiguous, and easily understandable on their faces and require no extraneous evidence

for interpretation” and provided example equations, with no source authority for the

particular components and calculations employed in the example equations.1

¶8 Following retirement of the presiding judge, Hon. Nels Swandal, the District

Court’s partial summary judgment order became known in the litigation as the “Swandal

Formula,” even though, technically, it provided no actual “formula” based upon contract

language, but only example equations. Nonetheless, the order significantly altered the

litigation going forward. The Officers thereafter embraced the equations the District Court

1
It is not clear why the District Court used the years 1994 and 1995 in its equations.
6
had adopted sua sponte, rather than the accumulation theory drawn from the CBAs that

they had originally stated in their complaint. The Officers’ expert accountant testified:

Q. And it’s correct, is it not, that you did not use in your computations
the longevity formulas that appear in the [CBAs].

A. I believe I used the judge’s—

Q. Right.

A. —requirement.

Q. Right. I just wanted to make that clear. You didn’t use the longevity
formula in the three contracts, you used the Judge’s order?

A. That’s correct.2

¶9 The District Court’s sua sponte incorporation of a non-completed year of service

within the years-of-service multiplier took the City by surprise, as that specific issue had

not been previously raised in the litigation or briefed, and was contrary to the City’s

longstanding practice in wage agreement administration. As the City’s Human Resource

Director testified, when asked about the Swandal Formula:

Of course, you know I disagree . . . . And you’re going to tell me, well,
Swandal has already heard that, but how do you have 1 year of experience at
Day 1? I’m very passionate about that, because I don’t understand that. We
have 3 other groups that are also paid longevity. We have police—or sorry—
teamsters, fire and non-bargaining, and all of those 3 groups also start after
completed years of service. You have to complete a year before you get
longevity . . . .

2
Although not explained by the District Court in its order, the Swandal Formula may have
impliedly incorporated portions of the Officers’ original accumulation theory within its example
equations. The City’s protestations on appeal notwithstanding, the Officers cannot be faulted for
embracing the Swandal Formula’s more favorable contract interpretation and abandoning their
original theory. Nonetheless, this development helps to illustrate that the CBAs were subject to
multiple interpretations.
7
This understanding of longevity was echoed in the testimony of the Officers’ Class

Representative:

Q. As far as you know, when the police union and the city in their
longevity contracts talked about years of service, was the
understanding that years of service was a count of completed years?
That is, you sign on, and at the end of 12 months, you’ve got a year.

A. I believe so, yes, sir. That would be longevity. [(Emphasis added.)]

¶10 Following a bench trial, the District Court issued findings of fact, conclusions of

law and an order.3 Ruling that “[t]he plain language of the CBAs governs the outcome of

this case,” the District Court again refused to consider extrinsic evidence offered by the

City about the meaning of the longevity formulas in the CBAs. The court stated it was

making “one exception” to this ruling, for purposes of considering extrinsic evidence about

the years-of-service multiplier, reasoning the omission of the multiplier in the 2003-2006

and 2006-2009 CBAs was merely a “scrivener’s error.” Noting that Judge Swandal had

previously “interpreted the formula such that an officer in his first year of service would

have longevity calculated to include one year of service,” the District Court adopted the

same interpretation, concluding that “longevity must be calculated in accordance with the

plain language of the CBAs, ‘at the beginning of year one.’” Although the term, “at the

beginning of year 1,” was stated only in the 2000-2003 CBA, the District Court applied the

term to the successive CBAs based on consideration of extrinsic evidence.

3
Hon. Brenda Gilbert assumed the case upon Judge Nels Swandal’s retirement, and conducted the
trial.
8
¶11 However, while stating it was making this “one exception” to the exclusion of

extrinsic evidence, the District Court nonetheless selectively considered and relied upon

other extrinsic evidence that was critical to its findings of fact and conclusions of law.

First, the District Court found that “[h]istorically, the City calculated longevity beginning

on day one of year one.” To support this factual finding, the District Court cited to extrinsic

evidence—a purported internal City memorandum.4

¶12 Secondly, the District Court found that “the City does write plain language

agreements calling for longevity increases only after completion of one year of service,”

citing to extrinsic evidence of the later 2009-2012 CBA negotiated between the Union and

the City, which provided for longevity pay based upon “years of completed service.”

(Emphasis added.) Citing these two findings of fact, both clearly premised upon extrinsic

evidence of the City’s practices outside the subject CBAs, the District Court entered the

following conclusion of law:

The fact that the City historically paid longevity commencing in an officer’s
first year of service, and the fact that the City changed its longevity language,
after this case was filed[,] to state that longevity was to be calculated based
upon completed years of service, both cause the Court to question the
credibility of the City’s position to the contrary.

4
In addition to challenging the District Court’s reliance on this extrinsic evidence, the City also
challenges the factual finding as clearly erroneous for lacking substantial evidence, because the
purported memorandum on which the finding of fact is based does not actually exist, and, in any
event, the finding is directly contrary to the clear record evidence that the City has continuously
paid longevity only after an officer completes one year of service. The Officers do not answer the
City’s clearly erroneous argument. For purposes of our decision, we address the District Court’s
reliance on extrinsic evidence, but do not address whether the finding of fact is also clearly
erroneous.
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¶13 The District Court entered a final judgment requiring the City to pay the Officers

$932,960.90, imposing a 110% penalty of $1,026,256.99, and awarding attorneys’ fees of

$653,072.63 and costs of $125,854.60, for a total of $2,738,145.12. The City appeals.

STANDARD OF REVIEW

¶14 We review questions of law, including the interpretation of provisions in a collective

bargaining agreement, for correctness. Kuhr v. City of Billings, 2007 MT 201, ¶¶ 13, 18,

338 Mont. 402, 168 P.3d 615 (citing Reier Broad. Co. v. Reier, 2000 MT 120, ¶ 20, 299

Mont. 463, 1 P.3d 940; Hughes v. Blankenship, 266 Mont. 150, 154, 879 P.2d 685, 687

(1994)).

DISCUSSION

¶15 Did the District Court err by holding that the CBAs were unambiguous and
excluding extrinsic evidence concerning interpretation of those agreements?

¶16 We are here concerned with whether the law was properly applied to the

interpretation of a collective bargaining agreement. “The interpretation of provisions in a

collective bargaining agreement is a question of law.” Kuhr, ¶ 18 (citing Hughes, 266

Mont. at 154, 879 P.2d at 687); accord Wurl v. Polson Sch. Dist. No. 23, 2006 MT 8, ¶ 16,

330 Mont. 282, 127 P.3d 436. If the “contract provision is clear and unambiguous,” the

“court must apply the language as written.” Kuhr, ¶ 18 (citing Wurl, ¶ 16). However, “[i]f

a contract term is ambiguous, interpretation of the term requires resolving a question of

fact regarding the intent of the parties to the contract.” Kuhr, ¶ 18 (citing Wurl, ¶ 17);

accord In re Marriage of Mease, 2004 MT 59, ¶ 30, 320 Mont. 229, 92 P.3d 1148 (holding

a contract ambiguity requires “a determination of a question of fact: the real intention of
10
the parties at the time of contracting”). Whether ambiguity exists is a “question of law for

the court’s determination.” Kuhr, ¶ 18 (citing Wurl, ¶ 17). “An ambiguity exists where

the language of the contract, as a whole, could reasonably be subject to two different

meanings.” Kuhr, ¶ 18 (citing Wurl, ¶ 17); accord State v. Asbeck, 2003 MT 337, ¶ 18,

318 Mont. 431, 80 P.3d 1272. If the court determines that an ambiguity is present in the

instrument, then “extrinsic evidence may be introduced at trial to allow the trier of fact to

determine the intent of the parties in entering into the contract.” Mary J. Baker Revocable

Trust v. Cenex Harvest States Coop., Inc., 2007 MT 159, ¶ 55, 338 Mont. 41, 164 P.3d 851

[hereinafter Baker Revocable Trust].

¶17 The City and the Officers both acknowledge there are language inconsistencies

within the subject CBAs, but disagree about the significance of these problems, and

whether they rise to a contract ambiguity as a matter of law. Additionally, the parties read

different meanings into the existent contract language. The Officers read the term “at the

beginning of year 1” in the 2000-2003 CBA to mean that longevity is to be paid from the

beginning of the first year of employment, and believe that phrases stated on pay matrices

attached to the CBAs support this interpretation. They further argue that the term is meant

to modify the years-of-service multiplier. In contrast, the City believes that the term must

be read as part of the complete phrase set between two multiplication signs, “the hourly

rate of an officer at the beginning of year 1,” to mean that the rate of longevity pay is

calculated based upon what Officers earned at the beginning of the first year of

employment. Both of these interpretations of the contract language are reasonable

11
readings, thus creating a legal ambiguity. Kuhr, ¶ 18. The City argues that its

interpretation, requiring an officer to complete a year of service, is supported by common

meaning of the word “longevity,” by common law rules of grammatical construction that

generally require a term (“at the beginning of year 1”) to modify the last antecedent (“the

hourly rate of an officer”), and by the long history and practice of the parties under the

CBAs. Of course, consideration of the parties’ history and practice would first require a

legal determination of contract ambiguity, followed by the admission of extrinsic evidence

at trial. Such offers of proof were made by the City, but were denied by the District Court.

¶18 Adding to the interpretational difficulty is the fact that not one, but three, CBAs are

at issue, providing different language. The contested term mentioned above, “at the

beginning of year 1,” is found only in the 2000-2003 CBA. Not only was its meaning

contested, but the propriety of its continued application to the subsequent CBAs was

another legal question to be determined in the proceeding. The District Court, both in the

Swandal Formula and after trial, resolved these questions in the Officers’ favor. The

problem is that the Swandal Formula, premised upon no pleading or briefing, provided no

explanation about how it arrived at these determinations, but simply incorporated them into

equations; then, the District Court reached the same conclusions after trial by doing what

it explicitly said it would not do—relying on extrinsic evidence of the City’s practices

outside the subject CBAs. As noted above, the District Court used extrinsic evidence to

resolve the most critical longevity calculation issue: the rejection of the City’s

12
demonstrably long practice of calculating years of service based upon completed years of

service.

¶19 The District Court’s legal analysis was inherently contradictory and legally

incorrect. Although concluding as a matter of law that the subject CBAs contained no

ambiguity and could be resolved on their plain language, the District Court nonetheless

considered and relied upon extrinsic evidence to interpret the CBAs. “If the court

determines that the instrument contains no ambiguity, then the extrinsic evidence may not

be considered further.” Baker Revocable Trust, ¶ 55. Only when “the court determines

that an ambiguity is present in the instrument” may extrinsic evidence be introduced at trial

to determine the intent of the parties. Baker Revocable Trust, ¶ 55.

¶20 At a minimum, some ambiguity in the CBAs was acknowledged by the parties and

by the District Court by applying the years-of-service multiplier to all of the CBAs, even

though it was contained only in the 2000-2003 CBA. While the District Court described

this as a “scrivener’s error,” it nonetheless here required extrinsic evidence to interpret the

CBAs correctly. The District Court received extrinsic evidence on this point, but

minimized its actions as the “one exception” it was making to the exclusion of such

evidence. However, despite this statement, the District Court cited and relied upon other

extrinsic evidence in its findings of fact and conclusions of law. It was an error of law to

rely on extrinsic evidence in favor of the Officers, while imposing a blanket exclusion upon

the extrinsic evidence offered by the City. Baker Revocable Trust, ¶ 55.

13
¶21 We conclude from a review of the record that the District Court erred by concluding

as a matter of law that the longevity provisions of the subject CBAs were unambiguous.

The differing language of the successive CBAs are reasonably subject to more

than one interpretation, and the blanket exclusion of all extrinsic evidence offered by the

City—while selectively relying on other extrinsic evidence—was likewise erroneous. We

reverse and remand for further proceedings consistent with this conclusion, and for

consideration at trial of extrinsic evidence about the parties’ intent, subject to application

of the Rules of Evidence.

¶22 Reversed and remanded for further proceedings.

/S/ JIM RICE

We concur:

/S/ LAURIE McKINNON
/S/ BETH BAKER
/S/ DIRK M. SANDEFUR
/S/ JAMES JEREMIAH SHEA

Justice Michael E Wheat, dissenting.

¶23 I dissent from the Court’s decision to reverse and remand the District Court’s Final

Order and Judgment. I conclude the District Court correctly ruled the City failed to pay

Officers’ wages and benefits, including longevity pay, in accordance with the applicable

collective bargaining agreements between the City and the Union; therefore, I would

affirm.

14
¶24 The majority opinion addresses a single issue: whether the District Court erred by

holding that the CBAs were unambiguous and excluding extrinsic evidence concerning

interpretation of those agreements. The Court contends that while the District Court ruled

the CBAs were unambiguous, it nonetheless cited and relied upon extrinsic evidence

beneficial to the Officers but excluded extrinsic evidence presented by the City. The Court

holds that this was an error of law. I conclude that one of the three examples of the District

Court’s purported use of extrinsic evidence set forth in the Court’s majority opinion, the

example pertaining to scrivener’s error, was appropriate. I further conclude the other two

examples did not constitute inadmissible extrinsic evidence.

¶25 Extrinsic, or parol, evidence is evidence relating to a contract but not appearing on

the face of the contract because it comes from other sources, such as statements between

the parties, depositions, correspondence, or the circumstances surrounding the agreement.

It is generally not admissible to contradict or add to the terms of an unambiguous contract.

Black’s Law Dictionary 675 (Bryan A. Garner ed., 10th ed. 2014). In other words, as noted

above in ¶ 16, if a contract is clear and unambiguous, the court must apply the language as

written and may not look to extrinsic evidence to interpret the language or determine the

intent of the parties. Kuhr, ¶ 18; Hanson v. Water Ski Mania Estates, 2005 MT 47, ¶ 14,

326 Mont. 154, 108 P.3d 481.

¶26 Here, the Court faults the District Court for considering extrinsic evidence regarding

the formula used to calculate longevity pay for Officers. Beginning in 1994, the City and

the Union negotiated CBAs containing a formula developed to calculate the amount of

15
longevity pay to be added to the Billings police officers’ hourly pay. Since 1994, the

formula consistently contained two fractional multipliers (.45 and .01), but the remaining

factors were less consistent. For example, the 1994-1997 CBA used the hourly rate of an

officer at the beginning of year one (referenced as PD1) multiplied by the years of service.

Consequently, the formula read: .45 x .01 x the hourly rate of PD1 x years of service. The

1997-2000 CBAs used the hourly rate of an officer at the beginning of year two; as a result,

the formula was: .45 x .01 x the hourly rate of PD2 x years of service. In the subsequent

and applicable CBAs, discussed below, the City again revised the formula factors.

¶27 As noted in ¶ 2 of the majority opinion, the three CBAs relevant to this case spanned

the time periods of July 1, 2000-June 30, 2003 (CBA I), July 1, 2003-June 30, 2006 (CBA

II), and July 1, 2006-June 30, 2009 (CBA III). The longevity clauses in each of these CBAs

read:

CBA I: Longevity shall be added to each officer’s hourly rate based upon
the following formula: .45 x .01 x the hourly rate of an officer at the
beginning of year 1 x years of service.

CBAs II and III: Beginning July 1, 2003,1 longevity shall be added to each
officer’s hourly rate based upon the following formula:
.45 x .01 x the hourly rate of an officer from year 1 to 15 years of service.
.50 x .01 x the hourly rate of an officer after year 15.

¶28 As is readily apparent when reading these clauses, CBAs II and III do not reference

that longevity must be calculated based upon the hourly rate of an officer “at the beginning

1
It appears the drafter of CBA III failed to change the operable date in the longevity clause
to July 1, 2006, as CBA III continues to read “Beginning July 1, 2003.”

16
of year 1.” Nor do the two latter CBAs include “years of service” as a critical and

statutorily-required multiplier. Section 7-32-4116, MCA, addressing minimum wage and

longevity pay of police in first- and second-class cities, states:

(1) Each duly confirmed member of a police department of cities of the first
and second class of Montana is entitled to a minimum wage for a daily
service of 8 hours’ work of at least $ 750 per month for the first year of
service and thereafter at least $ 750 a month plus 1% of the minimum base
monthly salary of $ 750 for each additional year of service up to and
including the 20th year of additional service.

. . .

(3) Added salary for years of service will be based on the base
monthly salary as established in this section and not on the actual current
salary.

¶29 The City testified that the omissions in CBAs II and III were inadvertent2 and the

City continued to calculate and pay longevity in the same manner it had done under CBA I,

using an officer’s base rate pay during his or her first year of service and multiplying it by

the number of years the officer had served. Accepting this undisputed testimony, the

District Court, then-presiding Judge Swandal, noted in its March 8, 2011 order that these

omissions were scrivener’s errors and reformed CBAs II and III accordingly.

Subsequently, Judge Gilbert, presiding over the case following Judge Swandal’s

2
As testified to by the City, the corrected formula in CBAs II and III would read:

.45 x .01 x the hourly rate of an officer at the beginning of year 1 x years of service
from year 1 to 15 years of service.
.50 x .01 x the hourly rate of an officer at the beginning of year 1 x years of service
after year 15 of service.
17
retirement, incorporated reference to this scrivener’s error in the court’s January 28, 2016

Findings of Fact, Conclusions of Law and Order.

¶30 The City now appears to argue on appeal that the District Court erred by accepting

its repeated admission that CBAs II and III failed to include “at the beginning of year 1”

and “years of service” in its longevity formula. In admitting this inadvertent omission, the

City also informed the District Court that its absence did not affect the manner in which it

calculated officer longevity and that it performed under CBAs II and III as it had under

CBA I, using the omitted factors as before. By admitting that it continued calculating

longevity as it had under CBA I, the City was also admitting that the absence of the formula

factors did not render CBAs II and III ambiguous from its perspective. Consequently,

informed that the omissions had no effect on the City’s performance, the District Court

concluded it was a scrivener’s error and incorporated the “corrected” formula into its July

8, 2011 order. The City did not object to the order and later praised Judge Swandal’s

manifest and correct understanding of the CBAs.

¶31 Subsequently, in December 2013, the City began arguing the meaning of “years of

service,” asserting it actually meant “years of completed service.” As such, the City now

argues that the District Court erred by reforming CBAs II and III based upon extrinsic

evidence, i.e., its admissions of inadvertent error as it pertains to the longevity formulas in

CBAs II and III. The City claims the court did not err by adding the omitted language but

that it erred by not attributing the City’s meaning of the omitted language. This argument

should not be well taken. The District Court concluded the language of CBA I was

18
unambiguous. Inserting the identical language into CBAs II and III did not render those

agreements ambiguous. “It has long been the rule of this Court that on appeal we will not

put a district court in error for a ruling or procedure in which the appellant acquiesced,

participated, or to which appellant made no objection.” State v. Daniels, 2017 MT 163,

¶ 34, 388 Mont. 89, 397 P.3d 460.

¶32 The second reference to extrinsic evidence noted in the Court’s majority opinion is

the court’s factual finding regarding the first date upon which the City historically

calculated longevity. Finding of Fact No. 17 states:

The City’s handling of the longevity formula has not been consistent.
Historically, the City calculated longevity beginning on day one of year one.
However, at times, the City computed longevity beginning in year two, as it
now argues is proper. This inconsistent calculation of longevity was detailed
in a Memo sent to Karla Stanton by a computer specialist employed by the
City.

¶33 The Court notes that the City claims the memo does not exist; however, the

existence or lack thereof of the memo is not decisive. The District Court heard testimony

that the City’s payment of longevity pay was inconsistent but ruled that the unambiguous

language of the CBA required the City to pay past due longevity calculated “at the

beginning of year one” in accordance with the plain language of the CBAs. The District

Court’s reference to evidence revealing the City’s inconsistency was not an improper

reliance on extrinsic evidence as it was not used to interpret the agreement or determine

the parties’ intent. Rather, it was an acknowledgment that the City was not calculating

longevity in the manner required by the applicable CBAs.

19
¶34 Notably, the District Court has twice ruled that the applicable CBAs dictate that

longevity pay begins on an officer’s first day of employment and not after a completed year

of service. The District Court first concluded this in its July 8, 2011 order. At that time,

Judge Swandal was tasked with ruling on Watters’ motion for partial summary judgment

in which Watters argued the City failed to add longevity payments to each officers’ base

hourly rate; rather, the City erroneously paid longevity as a separate, stand-alone payment.

This stand-alone method resulted in the underpayments of longevity benefits. Judge

Swandal concluded that the language of the CBAs unequivocally required the City to add

longevity payments to each officers’ hourly rate. While the parties had not yet raised the

issue of the meaning of “years of service,” the court set forth the following example,

applying the formula to “an officer who is in his 11th year of service”: .45 x .01 x $10.8898

x 11 = .539. In this example, by using eleven years of service before the officer had

completed the eleventh year of service, the District Court interpreted the CBA to provide

instant longevity. As noted above, the City did not object to the court’s interpretation at

that time and later lauded the District Court’s “straightforward example.” It was not until

December 2013 that the City asserted that “years of service” meant “years of completed

service” and that neither the City nor the Union intended the City to pay instant longevity.

¶35 Subsequently, in January 2016, the District Court, Judge Gilbert presiding, issued

its Findings of Fact, Conclusions of Law and Order and determined, as did Judge Swandal,

that under CBAs I-III, longevity pay began “in an officer’s first year of service.”

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¶36 Lastly, the District Court’s third reference to extrinsic evidence, as pointed out in

the majority opinion, is the District Court’s reference to the July 1, 2009-June 30, 2012,

CBA between the Officers and the City. In this collective bargaining agreement, drafted

as the case before us was proceeding, the “years of service” longevity pay factor was

revised to expressly state “years of completed service.” Again, the court’s review of the

2009-2012 CBA was not intended to obtain evidence to aid in the interpretation of the

earlier CBAs, or determine the intention of the parties. It was referenced to illustrate that

the City was capable of drafting an agreement that clearly stated its intention to calculate

and pay longevity benefits based upon years of completed service. Moreover, the District

Court’s observation of the change in the 2009 CBA went to the City’s credibility, rather

than to contract interpretation.

¶37 It is well-established that courts must enforce written contracts as written and not

insert what has been omitted or omit what has been inserted. Section 1-4-101, MCA.

Additionally, “[e]vidence of surrounding circumstances may not be used to add to, vary,

or contradict the terms of the contract. Nor may extrinsic evidence be used . . . to show an

intention independent of the instrument.” Broadwater Dev., L.L.C. v. Nelson, 2009 MT

317, ¶ 21, 352 Mont. 401, 219 P.3d 492 (internal citations omitted).

¶38 In this case, the District Court concluded that CBA I was unambiguous and clearly

stated that longevity was to be added to an officer’s hourly rate at the beginning of year

one. The court subsequently reformed CBAs II and III based upon the City’s testimony

that it erroneously omitted reference to an officer’s hourly rate at the beginning of year one

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x years of service. After reformation based upon admitted scrivener’s error, the three CBAs

clearly stated that an officer’s longevity pay was to be calculated “at the beginning of year

1.” The City has ample experience in drafting CBAs with its fire and police providers as

reflected in the 1997-2000 CBA in which the City based longevity upon the hourly rate of

an officer at the beginning of his or her second year of service and the 2009-2012 CBA

draft expressly stating that calculation of longevity was based upon years of completed

service. While the City strenuously argues against the court’s interpretation, the District

Court and this Court must interpret the language in the contract before it.

¶39 Additionally, I believe the Court is remiss in failing to address other issues raised

by the parties on appeal. Those issues, including but not limited to the proper statute of

limitations, the appropriate class members based upon accrual date, and certain damage

awards, are likely to be raised and/or challenged in the subsequent proceeding on remand

and may very well be subject to a subsequent appeal. As these issues are currently before

this Court, they should be resolved prior to remand.

¶40 I conclude the Court’s majority improperly put the District Court in error for

accepting extrinsic evidence to appropriately reform CBAs II and III based upon

admissions of inadvertence. I further conclude the “extrinsic” evidence the majority asserts

the District Court relied upon, i.e., the City’s inconsistent payment of longevity pay and

the court’s reference to the 2009 CBA, was not extrinsic evidence in that the court did not

rely upon it to assist in interpreting the plain language of the CBAs or to discern the intent

of the parties. Lastly, I conclude the District Court correctly interpreted the plain language

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of the contract and refused to accept contradicting extrinsic evidence. I dissent from the

Court’s decision to reverse.

/S/ MICHAEL E WHEAT

Chief Justice Mike McGrath joins the Dissent of Justice Michael E Wheat.

/S/ MIKE McGRATH

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