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.
9
¶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.”
20
¶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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Watters v. City of Billings
Court: Montana Supreme Court
Date filed: 2017-09-26
Citations: 2017 MT 211, 388 Mont. 376
Copy CitationsCombined Opinion