No. 87-175
IN THE SUPREME COURT OF THE STATE OF MONTANA
THOMAS MALLOY and HARRIET A. MALLOY,
Plaintiffs and Appellants,
-vs-
JUDGE'S FOSTER HOME PROGRAM, I N C . ,
and GLLMARY VAUGHAN, Director,
et al.
Defendants and Respondents.
APPEAL FROM: District Court of the Third Judicial District,
In and for the County of Deer Lodge,
The Honorable Mark P. Sullivan, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Erdmann & Wright; F. Woodside Wrigh.t, Helena, Montana
For Respondent:
Knight, Dahood, McLean & Everett; Bernard J. Everett,
Anaconda, Montana
Submitted on Briefs: Oct. 1, 1987
Decided: December 3, 1987
Filed:' .
Clerk
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
Thomas Malloy and Harriet Malloy appeal from an order of
the District Court, Third Judicial District, Deer Lodge
County, granting the defendants1 motion to dismiss on the
grounds that plaintiffs have failed to state a cause of
action for which relief could be granted. We affirm.
The plaintiffs present four issues on appeal. They are:
(1) Whether the District Court erred in dismissing all
claims of plaintiff Thomas Malloy; (2) Whether the District
Court erred in dismissing count I of plaintiff Harriet
Malloy's complaint for breach of contract; (3) Whether the
District Court erred in dismissing count I1 of plaintiff
Harriet Malloy's complaint which claimed that her termination
was in violation of public policy; and, (4) Whether the
District Court erred in dismissing count I11 of Harriet
Malloy's complaint for breach of the implied covenant of good
faith and fair dealing.
"Discovery House" is a home for underprivileged and
disturbed youths in the Anaconda area. Discovery House is
under the auspices of the Judge's Foster Home Program, Inc.,
a non-profit corporation organized exclusively for
charitable, religious, educational and scientific purposes.
The program is licensed by the State of Montana Department of
Social and Rehabilitative Services (SRS) and subject to its
licensing requirements. The Home is operated by "house
parents" whose duties include overseeing the day-to-day
affairs of the home as well as providing a home-like
atmosphere for the special residents of Discovery House.
Tom and Harriet Malloy were first employed as house
parents in 1982. From 1982 until 1985, plaintiffs were
employed on the basis of yearly contracts. In December,
1985, Harriet entered into a 13 month contract for her
services. The contract made no mention of Tom nor was he a
signatory to the contract. Although the contract was for a
specified period it provided that either party could
terminate the contract with 30 days notice.
On April 10, 1986, Tom Malloy orally abused one of the
Discovery House residents in the presence of Jeananne Murphy,
a social worker and volunteer member of the Discovery House
Board of Directors. Although present during the incident,
Harriet Malloy made no attempt to intervene. Subsequent to
witnessing the child's oral degradation at the hands of Tom
Malloy, Murphy promptly filed a complaint with the Director
of Discovery House, Sister Gilmary Vaughan and referred the
incident to the regional supervisor of the SRS.
On April 17, 1986, Sister Vaughan notified Harriet
Malloy that she was suspended with pay pending the outcome of
the investigation by SRS. On April 30, 1986, SRS issued its
report which concluded that Tom used vulgar language and
admitted to doing so. The report further found Tom Malloy 's
conduct on April 10 to be in violation of the State of
Montana licensing requirements. The report also found that
Harriet had acted negligently in not intervening during the
April 10 incident.
Discovery House sent Harriet a letter on May 15, 1986,
which stated:
If you wish to continue your employment with the
Judge's Foster Home Program, Inc., under the
conditions outlined in this correspondence, then
please sign the original letter and return it to
Sister Gilmary Vaughan before you return to work.
You- - be expected - return - - -on May 23,
- will to to work
1986.
If you choose not to agree to return under the
stated conditions, then please notify the board of
directors by May 23, 1986 in writing of your
decision to resign, or your reasons why you cannot
sign this agreement. (Emphasis added.)
Harriet Malloy did not agree to the conditions
delineated in the May 15, 1986 letter nor did she return to
work on May 23, 1986 as she was directed. Subsequent to the
SRS investigation and report being completed, Harriet
requested a hearing on the complaint lodged against Thomas
Malloy. Discovery House refused her request for a hearing.
On August 18, 1986, Discovery House terminated Harriet
Malloy for her failure and refusal to return to work almost
three months after the date she was directed to do so.
The plaintiffs filed a three count extensive and
detailed complaint against Discovery House and its Board of
Directors, in their individual and representative capacities.
The District Court granted the defendant's motion to dismiss
the Malloys' complaint. The plaintiffs appeal from the
judgment of the District Court.
The plaintiffs submit that the District Court erred in
dismissing the claims of Thomas Malloy against the defendant.
We disagree.
In Hasbrouck v. Krsul (1975), 168 Mont. 270, 272, 541
P.2d 1197, 1198, this Court, in discussing the standard of
review to be applied in cases dealing with a motion to
dismiss, stated:
... a complaint should not be dismissed for
failure to state a claim unless it appears beyond
doubt that the plaintiff can prove no set of facts
in support of his claim which would entitle him to
relief.
Citing Conley v. Gibson (1957), 355 U.S. 41, 45-46, 78 S.Ct.
99, 102, 2 L.Ed.2d 80, 84. See also Gebhart v. D. A.
Davidson Co. (Mont. 1983), 661 P.2d 855, 40 St.Rep. 521;
Rusch v. Kamrnerer (1982), 200 Mont. 130, 649 P.2d 1339.
Thomas Malloy can prove no set of facts in support of
his claim which would entitle him to relief. Thomas Malloy
claims that an employment relationship existed between
Discovery House and himself. He asserts that he was the
"designee" mentioned in clause VII of the contract which
Harriet signed in December, 1985. Clause VII provides:
The party of the second part agree [sic] that she
or her designee, shall remain in the house when
there are youth present. At no time is a youth to
be left in the facility alone.
Thomas Malloy is not mentioned in clause VII, in fact
there is no mention of Thomas Mall-oy in the entire contract.
Although Malloy had been a party to the contract in previous
years, the record shows that he was not a signatory to the
contract and in fact Sister Vaughan negotiated with Harriet
Malloy and constructed her employment contract with the
specific purpose of excluding him.
There is nothing in paragraph VII of this contract that
could be construed to effect an employment relationship
between Discovery House and the designee. The contract and
the "Guide for House Parents" which was given to Harriet
Malloy make it clear that it is the house parent's, not
Discovery House's, responsibility to secure a replacement or
designee and the houseparent seeking a replacement is further
responsible for compensating the designee.
The contract is straight-forward and clear. There is no
ambiguity in regard to Thomas Malloy's relationship with
Discovery House under the terms of the contract; the
relationship was nonexistent. In Danielson v. Danielson
(1977), 172 Mont. 55, 58, 560 P.2d 893, 894, this Court
stated:
It is clear from Montana cases that where the
language of a written contract is clear and
unambiguous there is nothing for the court to
construe; the duty of the court is simply to apply
the language as written to the facts of the case,
and decide the case accordingly.
We conclude that no contractual employment relationship
existed between Thomas Malloy and Discovery House and thus
affirm the District Court's action in dismissing all claims
of Thomas Malloy.
Appellant asserts that the District Court erred in
dismissing Harriet Malloy's complaint against the defendants
for breach of contract. We disagree.
Harriet Malloy premises her breach of contract theory on
Clause VIII of her December 31, 1985 employment contract
which provides:
This agreement is subject to termination by either
party hereto, upon giving thirty (30) days written
notice to the other party of the intent to
terminate.
Harriet Malloy insists that Discovery House did not give
her 30 days advance notice before terminating her employment
and so was in breach of contract. Mrs. Malloy contends that
the allegation places the 30 day notice requirement in issue
thus precluding di.smissa1 of the complaint by the District
Court.
It is a well-settled rule of contract law that a party
who cornrnit.~ the initial breach cannot complain of a
subsequent breach by the other party. Bradford v. New York
Times Corp. (2d Cir. 1974), 501 F.2d 51; Watson v. Auburn
Iron Works, Inc. (Ill. 1974), 318 N.E.2d 508; Aerostatic
Engineering Corp. v. Szczawinski (Mass. 1973), 294 N.E.2d
521.
In Rogers v. Relyea (19791, 184 Mont. 1, 8, 601 P.2d 37,
41, this Court held:
The general rule is that a party committing a
substantial breach of a contract cannot maintain an
action against the other contracting party or his
predecessor in interest for a subsequent failure to
perform if the promises are dependent. 17
Am.Jur.2d Contracts, § 366 p. 807. A substantial
or material breach is one which touches the
fundamental purposes of the contract and defeats
the object of the parties in making the contract.
In the immediate case, Harriet Malloy and Discovery
Xouse entered into an employment contract. The fundamental
purpose of the contract was that Harriet Malloy would provide
house parent services for Discovery House for which the
Judge's Foster Home Program would pay her. Harriet Malloy
committed a substantial and material breach of her employment
contract by failing to report for work for some 88 days after
being directed to do so. As Harriet Malloy committed the
initial material breach, she cannot maintain an action
against Discovery House for breach of contract.
Further, we concur with the opinion of the District
Court that the defendants complied with the provision
requiring 30 day notice by sending Harriet Malloy the May 15,
1986 letter informing her that if she wished to continue her
employment with the Judge's Foster Home, she should return to
work by May 23, 1986. Harriet Malloy did not return to work
on May 23, 1986, in fact at the time of her termination, 88
days had passed since she was invited to return. Harriet
Malloy has failed to state a cause of action against
defendants for breach of contract for which relief could be
granted.
Plaintiff Harriet Malloy next contends that the District
Court erred in dismissing count I1 of her complaint alleging
that her termination was in violation of public policy.
Harriet Malloy submits that her termination was in violation
of her federal and state constitutional right to due process
of law. We find the contrary to be true.
Harriet Malloy proffers the argument that her employment
contract is a property right and therefore rights of due
process attach. In Board of Regents v. Roth (1972), 408 U.S.
564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548, 561, the
United States Supreme Court delineated the elements necessary
for an employee to have a protected property interest in
their employment. The Court held:
[to1 have a property interest in a benefit, a
person clearly must have more than an abstract need
or desire for it. He must have more than a
unilateral expectation of it. He must, instead,
have a legitimate claim of entitlement to it.
The court further held that:
The source of an entitlement establishing a
property interest may be found in state law or in
rules and understandings existing between the
individual and his employer.
Roth, 408 U.S. at 577, 92 S.Ct. at 2709, 33 L.Ed.2d at 561.
In Reiter v. Yellowstone County (Mont. 1981) , 627 P.2d
845, 848, 38 St.Rep. 686, 688, this Court held:
The employee must be able to point to an
independent source such as state law or rules or
understandings between the employer and his
employees.
Harriet Malloy maintains that the December 31, 1985
employment contract constitutes the independent source as
contemplated in Reiter, supra. This contention is without
merit. Mrs. Malloy has failed to specify any state law or
rules or understanding with her employer that could be
construed as an independent source entitling her to due
process prior to termination.
As Harriet Malloy cannot establish that she had a
property interest in her employment at Discovery House, we
need not address the issue of whether Discovery House's
actions in denying her request for a hearing violated her due
process rights.
The first question to be answered is whether
appellant had a property or liberty interest which
is accorded due process protection by the
Fourteenth Amendment to the United States
Constitution and Article 11, Section 17, of the
Montana Constitution. (Citations omitted.) Only
if such an interest is established, may the
question of whether due process protections have
been violated be considered.
Akhtar v. Van De Wetering (1982), 197 Mont. 205, 210, 642
P.2d 149, 152.
Lastly, Mrs. Malloy contends that the District Court
erred in dismissing her complaint against the defendants for
breach of the implied covenant of good faith and fair
dealing. We disagree.
It is well settled that the implied covenant of good
faith and fair dealing exists in all employment situations
and that "[tlhe duty arises out of the employment
relationship yet the duty exists apart from, and in addition
to, any terms agreed to by the parties." Gates v. Life of
Montana Insurance Co. (Mont. 19831, 668 P.2d 213, 214, 40
St.Rep. 1287, 1288; See also Crenshaw v. Bozeman Deaconess
Hospital (Mont. 1984), 693 P.2d 487, 41 St.Rep. 2251.
The record is replete with examples of the defendants
efforts to fairly resolve the situation so that Mrs. Malloy
could continue in the employ of the Judge's Foster Home
Program, Inc. Mrs. Malloy refused to avail herself of any of
the opportunities that were presented to her.
The defendants had a legitimate business reason for
terminating Harriet Malloy's employment. At the time of her
discharge Mrs. Malloy had refused to return to work 88 days
after being directed to do so. As previously stated her
conduct constituted a material breach of her employment
contract and the defendants appropriately exercised the
remedy of discharge as their reasons for doing so were fair
and honest. Flanigan v. Prudential Federal Savings and Loan
Assn. (Mont. 1986), 720 P.2d 257, 43 St.Rep. 941.
We affirm. ,
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Justice OF-
We Concur: