Donald E. Price v. Oxford Graduate School, Inc.

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

June 17, 2014 Session

DONALD E. PRICE v. OXFORD GRADUATE SCHOOL, INC.

Appeal from the Chancery Court for Rhea County

No. 12CV10753 Hon. Jeffrey F. Stewart, Judge

No. E2013-02467-COA-R3-CV-FILED-JULY 30, 2014

This is a breach of contract case in which an administrator filed suit against a school for

unpaid severance pay. The school claimed that the administrator did not provide the requisite

30-day notice for severance pay pursuant to the terms of his contract. The trial court found

that the administrator satisfied the notice requirement under the term of his contract and

awarded him damages. The school appeals. We affirm the decision of the trial court.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court

Affirmed; Case Remanded

J OHN W. M CC LARTY, J., delivered the opinion of the Court, in which D. M ICHAEL S WINEY,

and T HOMAS R. F RIERSON, II, JJ., joined.

J. Arnold Fitzgerald, Dayton, Tennessee, for the appellant, Oxford Graduate School, Inc.

Stephen T. Greer, Dunlap, Tennessee, for the appellee, Donald E. Price, D.Th.

OPINION

I. BACKGROUND

Oxford Graduate School, Inc. (“Oxford”), a faith based graduate school in Dayton,

Tennessee, entered into an employment agreement with Donald E. Price, D.Th. to hire him

as its President and CEO. Part 9 of the employment agreement (“Part 9”) reads:

Should the Board of Regents decide to terminate Dr. Price’s employment, he

shall be given thirty days’ written notice and compensated for three months

pay from that date. In turn, Dr. Price may terminate his employment with

similar terms.

When Dr. Price tendered his written resignation, the letter provided, in pertinent part,

I hereby submit my resignation as the President and CEO of Oxford Graduate

School. I expect the board to honor my contract by giving me the 90 days

severance pay it stipulates. At the contractual rate of $90,000.00 per year, that

would be $22,500.00. In exchange, I will do what I can to help with the

transition over the next 90 days.

Despite numerous requests following his resignation, Oxford refused to provide severance

pay. Consequently, Dr. Price filed suit against Oxford for $22,500.

A hearing was held at which several witnesses testified, including Dr. Price and Loren

Humphrey, MD, Ph.D, a corporate representative for Oxford. Each testified about the

language in Dr. Price’s resignation letter and employment contract, as well as parol evidence

regarding the drafting of the employment agreement and Part 9 in particular.1

Dr. Humphrey testified that Part 9 required Dr. Price to terminate his employment with

“similar, but not identical terms.” He noted that Dr. Price requested the 30-day notice and

severance pay provision because he was leaving a higher paid position in a different state.

According to Dr. Humphrey, Part 9 was taken from a different document and was not

prepared by an attorney. Dr. Humphrey also testified that Dr. Price voluntarily resigned and

did not give any prior notice before submitting his resignation letter. He conceded that Dr.

Price offered to work with the school for 90 days.

Dr. Price testified that he requested the 30-day notice and severance pay provision

because he was leaving a higher paying job from a different state. He said the severance

provision was important to him but that Oxford did not express a desire for a similar

provision. Dr. Price explicitly stated that he would not have signed the contract without the

provision. He also testified that he voluntarily resigned and offered to work for 90 days after

submitting his letter. He conceded that he did not give any notice prior to tendering his

resignation.

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The trial court initially allowed parol evidence because the court was undecided on whether Part 9 was

ambiguous. After ruling that the contract was unambiguous, the trial court properly excluded all parol

evidence testimony before issuing its decision.

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Following the presentation of the above evidence and testimony, the trial court found

that the contract was unambiguous and that Dr. Price terminated his employment with “similar

terms” to the 30-day notice requirement imposed upon Oxford. Accordingly the trial court

awarded Dr. Price $22,500 in damages.

II. ISSUE

We consolidate and restate the issue raised on appeal by Oxford as follows:

Whether the trial court erred in awarding Dr. Price damages after finding that

he satisfied the terms of the employment agreement.

III. STANDARD OF REVIEW

The standard of review for a non-jury case is de novo upon the record. Wright v. City

of Knoxville, 898 S.W.2d 177, 181 (Tenn. 1995); Colonial Pipeline Co. v. Nashville &

Eastern R.R. Co., 253 S.W.3d 616, 620 (Tenn. Ct. App. 2007). The factual findings of the

trial court are accorded a presumption of correctness and will not be overturned unless the

evidence preponderates against them. See Tenn. R. App. P. 13(d). With respect to the legal

issues, this court’s review is conducted under a pure de novo standard of review. S.

Constructors, Inc. v. Loudon Cnty. Bd. of Educ., 58 S.W.3d 706, 710 (Tenn. 2001).

However, the interpretation of written agreements is a matter of law, which this court reviews

de novo without a presumption of correctness. See Guiliano v. Cleo, Inc., 995 S.W.2d 88,

95 (Tenn. 1999).

IV. DISCUSSION

Oxford contends that the trial court erred by finding that Dr. Price was entitled to

severance pay. Oxford asserts that Dr. Price failed to provide the requisite 30-day notice

pursuant to the contract and argues that Dr. Price voluntarily terminated his employment

without notice. Dr. Price responds that he satisfied the 30-day requirement by offering his

assistance with the transition for 90 days.

The cardinal rule of contract interpretation is that the court must attempt to ascertain

and give effect to the intention of the parties. Christenberry v. Tipton, 160 S.W.3d 487, 494

(Tenn. 2005). In attempting to ascertain the intent of the parties, the court must examine the

language of the contract, giving each word its usual, natural, and ordinary meaning. See

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Wilson v. Moore, 929 S.W.2d 367, 373 (Tenn. Ct. App. 1996). The court’s initial task in

construing the contract is to determine whether the language is ambiguous. Planters Gin Co.

v. Fed. Compress & Warehouse Co., 78 S.W.3d 885, 889-90 (Tenn. 2002). A contract is

ambiguous if its meaning is uncertain and is susceptible to more than one reasonable

interpretation. See Bonastia v. Berman Bros., 914 F.Supp. 1533, 1537 (W.D. Tenn. 1995);

Frank Rudy Heirs Assocs. v. Moore & Assocs., Inc., 919 S.W.2d 609, 613 (Tenn. Ct. App.

1995); Gredig v. Tennessee Farmers Mut. Ins. Co., 891 S.W.2d 909, 912 (Tenn. Ct. App.

1994). If the court determines that the language of a contract is ambiguous, the ambiguity

is construed against the drafter of the contract. See Hanover Ins. Co v. Haney, 425 S.W.2d

590, 592 (Tenn. 1968); Realty Shop, Inc. v. RR Westminster Holding, Inc., 7 S.W.3d 581, 598

(Tenn. Ct. App. 1999).

Ordinarily, the parol evidence rule would prevent a party to a written contract from

contradicting the terms of the contract by seeking the admission of “extrinsic” evidence. See

e.g., Maddox v. Webb Constr. Co., 562 S.W.2d 198, 201 (Tenn. 1978); Airline Constr., Inc.

v. Barr, 807 S.W.2d 247, 259 (Tenn. Ct. App. 1990). Parol evidence is inadmissible to add

to, vary, or contradict contract language. Stickley v. Carmichael, 850 S.W.2d 127, 132

(Tenn. 1992). “[I]t is generally agreed that the admissibility of parol evidence to prove the

intent of the signatory hinges on whether the instrument itself manifests some ambiguity.

Campora v. Ford, 1124 S.W.3d 624, 629 (Tenn. Ct. App. 2003) (citing United American

Bank v. First Citizens Nat’l Bank, 764 S.W.2d 555 (Tenn. Ct. App. 1998)). In general terms,

an ambiguity occurs where a word or phrase is capable of more than one meaning when

viewed in the context of the entire agreement by an objective and reasonable person. Id.

(citing Walk-in Med. Ctrs., Inc. v. Breuer Capital Corp., 818 F.2d 260, 263 (2d Cir. 1987)).

We agree with the trial court that the terms of the contract are clear and unambiguous

and that the previously considered parol evidence was properly excluded. Accordingly, we

must now consider whether Dr. Price’s resignation was compliant with the terms of the

contract. Part 9 required Oxford to provide Dr. Price with 30 days notice, thereby entitling

him to severance pay. Dr. Price tendered his written resignation and offered to avail himself

to the school for 90 days following the submission of his resignation letter. We agree with

the trial court that Dr. Price satisfied the condition of resigning under “similar terms” by

availing himself to Oxford for 90 days after tendering his resignation. At that point, Oxford

could have called upon Dr. Price to continue to provide services for this ninety (90) day

period since it had committed to compensate him. Without a request from Oxford coupled

with a refusal from Dr. Price the ninety (90) day compensation provision was binding upon

Oxford. With these considerations in mind, we conclude that the trial court did not err in

awarding Dr. Price severance pay in the amount of $22,500.

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V. CONCLUSION

The judgment of the trial court is affirmed, and the case is remanded for such further

proceedings as may be necessary. Costs of the appeal are taxed to the appellant, Oxford

Graduate School, Inc.

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JOHN W. McCLARTY, JUDGE

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