ASSOCIATES v. MAHER

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Docket Number

No. 508791.

Advocates

Harris, Conway Donovan, P.L.L.C., Albany (Ryan T. Donovan of counsel), for appellant. The Mills Law Firm, L.L.P., Clifton Park (Christopher K. Mills of counsel), for respondent.

Judges

Elizabeth A. Garry

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Smart Summary

Factual and Procedural Background

In July 2006, defendant Patrick L. Maher began employment with plaintiff Currier, McCabe Associates, Inc., a domestic corporation. Shortly after starting, the parties executed an Employment Agreement in which defendant acknowledged having read and agreed to the terms and conditions of the company's Employee Handbook. The handbook included a professional development program providing tuition reimbursement for educational courses, with a repayment obligation if an employee left within one year of completing such training. The handbook also contained a disclaimer stating that its policies did not create a contract or contractual obligations.

Defendant was pursuing graduate studies at the time of employment and continued to do so with plaintiff paying his tuition. Within his first year and two months after completing his degree, defendant resigned and refused to reimburse plaintiff for tuition expenses. Plaintiff sued for breach of contract. Defendant moved for summary judgment dismissing the complaint, while plaintiff cross-moved for summary judgment. The Supreme Court denied both motions. Defendant appealed.

Legal Issues Presented

Whether the Employee Handbook's disclaimer precludes the handbook's substantive terms, including the tuition reimbursement provision, from forming part of a binding contract when the employee expressly agrees to the handbook's terms in a separate written agreement.
Whether the contractual language at issue is ambiguous and, if so, whether the ambiguity can be resolved as a matter of law without extrinsic evidence.
Whether plaintiff is entitled to summary judgment based on the interpretation of the Employment Agreement and handbook provisions.

Arguments of the Parties

Appellant's Arguments

Defendant argued that his agreement to the handbook's terms included the disclaimer, which prevented any handbook terms, including the tuition reimbursement provision, from becoming contractually binding.
He contended that no contract was formed obligating him to reimburse tuition expenses.

Respondent's Arguments

Plaintiff contended that defendant's express agreement to the handbook's terms rendered the disclaimer legally irrelevant.
The disclaimer was intended only to prevent the handbook from being construed as an implied contract on its own, not to negate contractual obligations when the employee expressly agreed to be bound by the handbook.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162	Contract interpretation and determination of ambiguity are questions of law for the court.	The court relied on this precedent to confirm it could resolve the dispute as a matter of law by interpreting the contract language.
Estate of Hatch v NYCO Mins., 245 AD2d 746, 747	Contract interpretation as a question of law.	Supported the court's authority to interpret the contract without extrinsic evidence.
Stevens Thompson Paper Co., Inc. v Niagara Mohawk Power Corp., 49 AD3d 1011, 1012	Principles guiding contract interpretation.	Used to emphasize examining the entire contract and context.
Atwater Co. v Panama R.R. Co., 246 NY 519, 524 (1927)	Contractual language must be read in context and with regard to parties' intentions.	Guided the court’s holistic approach to interpreting the Employment Agreement and handbook.
Mount Vernon Fire Ins. Co. v Creative Hous., 88 NY2d 347, 352	Disagreement between parties does not alone create ambiguity.	Supported the court’s conclusion that the contract was unambiguous despite differing interpretations.
Lobosco v New York Tel. Co./NYNEX, 96 NY2d 312, 317	Effect of disclaimers in employee handbooks on contract formation.	Referenced to illustrate that absence of reference to handbook can prevent handbook terms from becoming contractual.
Hudson-Port Ewen Assoc. v Chien Kuo, 165 AD2d 301, 303, affd 78 NY2d 944	Summary judgment appropriate where ambiguity can be resolved without extrinsic evidence.	Justified resolving the dispute on the agreement alone without additional evidence.
Sutton v East Riv. Sav. Bank, 55 NY2d 550, 554-555	Contract interpretation should realize reasonable expectations and avoid absurd results.	Used to reject defendant's interpretation as unreasonable and contradictory to the agreement’s purpose.
Tougher Heating Plumbing Co. v State of New York, 73 AD2d 732, 733	Literal contract language should not defeat the agreement’s purpose.	Supported interpreting the agreement to give effect to the handbook’s substantive terms despite the disclaimer.
B.T.R. E. Greenbush v General Acc. Co., 206 AD2d 791, 792	Reasonable interpretation governs contract construction.	Applied to determine that the only reasonable interpretation was that handbook terms were contractually binding.
Merritt Hill Vineyards v Windy Hgts. Vineyard, 61 NY2d 106, 110-111	Court’s authority to grant summary judgment on appeal.	Supported this Court’s authority to grant plaintiff summary judgment despite no appeal from denial of cross motion.
Peter Scalamandre Sons, Inc. v State of New York, 65 AD3d 774, 777 (2009)	Court’s power to search record and grant summary judgment.	Used to justify granting plaintiff summary judgment on appeal.
Sherba v Midstate Precast Sys., 230 AD2d 944, 946	Same as above regarding summary judgment authority.	Supported appellate court’s authority to grant summary judgment.

Court's Reasoning and Analysis

The Court first confirmed that contract interpretation and ambiguity determination are questions of law for the court, allowing resolution without extrinsic evidence. It examined the Employment Agreement and Employee Handbook as a whole, emphasizing the necessity to interpret contractual language in context and according to the parties' intentions.

The Court found the contract unambiguous despite the parties’ differing interpretations. The handbook’s disclaimer, stating its policies do not create contractual obligations, was understood as preventing the handbook alone from forming an implied contract. However, because the defendant expressly agreed to the handbook’s terms in a separate written agreement, the disclaimer did not negate the contractual effect of those terms.

The Court rejected the defendant’s interpretation as illogical and self-contradictory because it would render inclusion of handbook terms meaningless and defeat the purpose of the Employment Agreement. Instead, the Court held that the parties’ reasonable expectations and the agreement’s purpose supported treating the handbook’s substantive provisions, including the tuition reimbursement clause, as contractually binding.

Therefore, the Court concluded that plaintiff was entitled to summary judgment as a matter of law, granting plaintiff’s cross motion despite the Supreme Court’s prior denial.

Holding and Implications

The Court modified the order by reversing the denial of plaintiff’s cross motion and granted summary judgment to plaintiff.

This decision holds that an employee’s express agreement to the terms of an employee handbook incorporated by reference in a separate written employment agreement renders handbook provisions contractually binding, notwithstanding any disclaimer in the handbook that its policies do not create contractual obligations on their own. The ruling enforces the contractual effect of handbook terms when explicitly incorporated, clarifying the legal effect of disclaimers in such contexts. The direct effect is that defendant must reimburse plaintiff for tuition expenses as provided in the handbook. No new precedent was established beyond the application of existing contract interpretation principles.

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CURRIER, MCCABE ASSOCIATES, INC., Doing Business as CMA CONSULTING SERVICES, Respondent, v. PATRICK L. MAHER, Appellant.

Garry, J.

In July 2006, defendant began working for plaintiff, a domestic corporation. Shortly after his start date, he and Plaintiff's representative executed an "Employment Agreement" which, among other provisions, stated that defendant "acknowledges that he/she has read the EMPLOYEE HANDBOOK and as indicated by the signature below, agrees to the preceding terms and conditions, as well as those outlined in the handbook." As relevant here, the employee handbook includes a section describing a professional development program by which plaintiff pays for educational and training courses for its employees, and first year employees who leave their positions within one year of obtaining such training are required to repay these expenses. The handbook also includes a disclaimer providing that the "[p]olicies set forth in this handbook are not intended to create a contract, nor are they to be construed to constitute contractual obligations of any kind or a contract of employment between [plaintiff] and any of its employees."

Defendant was in the course of graduate studies when he began his employment. He continued to pursue his education thereafter, and plaintiff paid his tuition. In 2007, during his first year of employment with plaintiff and within two months after completing his degree program, defendant resigned from his position. He refused to reimburse plaintiff for his tuition and related expenses, and plaintiff commenced this action alleging breach of contract. Defendant moved for summary judgment dismissing the complaint, and plaintiff cross-moved for summary judgment. Supreme Court denied the motion and the cross motion. Defendant appeals.

Both parties now contend that Supreme Court erred in finding that issues of fact preclude summary judgment, in that they believe the disputed contractual language is unambiguous and that its interpretation is an issue of law within the province of this Court ( see W.W.W Assoc., v Giancontieri, 77 NY2d 157, 162; Estate of Hatch v NYCO Mins., 245 AD2d 746, 747). They further agree that the parties intended to incorporate the terms of the handbook into their employment agreement. They differ entirely, however, in their analysis of the result. According to defendant, his agreement to the handbook's terms and conditions includes the disclaimer, which in turn prevents any of the handbook's other terms, including the tuition reimbursement provision, from becoming contractually binding. In defendant's view, no contract was formed, and he is not obliged to reimburse plaintiff for his tuition. Plaintiff contends that defendant's express agreement to the terms and conditions of the handbook renders the disclaimer legally irrelevant; in Plaintiff's view, the disclaimer was solely intended to prevent the handbook from being construed as an implied contract in its own right and is inapplicable where an employee expressly agrees to be bound by the handbook's terms.

We agree that this dispute may be resolved as a matter of law. The interpretation of an unambiguous contract and the determination whether a contract is ambiguous are issues of law to be determined by the courts ( see W.W.W. Assoc., v Giancontieri, 77 NY2d at 162; Stevens Thompson Paper Co., Inc. v Niagara Mohawk Power Corp., 49 AD3d 1011, 1012). In making these determinations, "[t]he court should examine the entire contract and consider the relation of the parties and the circumstances under which it was executed. Particular words should be considered, not as if isolated from the context, but in the light of the obligation as a whole and the intention of the parties as manifested thereby. Form should not prevail over substance and a sensible meaning of words should be sought" ( Atwater Co. v Panama R.R. Co., 246 NY 519, 524 [1927]; see Matter of Proper [Sterling Ins. Co.], 252 AD2d 802, 804).

Reading the agreement as a whole in accordance with these principles, we find that it is not ambiguous. "[Provisions in a contract are not ambiguous merely because the parties interpret them differently" ( Mount Vernon Fire Ins. Co. v Creative Hous., 88 NY2d 347, 352). The written agreement sets forth the terms of defendant's employment and, regarding the handbook, provides only that defendant also agrees to its terms and conditions. The handbook's initial provision stating that its "policies" are not intended to create a contract is merely a disclaimer and not one of those substantive policies. Its stated purpose is to prevent the policies, in and of themselves, from being construed as an implied employment contract. Defendant's execution of a separate contract in which he expressly agreed to the handbook's terms rendered this purpose inapplicable. It was defendant's execution of this agreement, and not any provision of the handbook, that created his contractual obligations; thus, no conflict resulted from the disclaimer's prohibition against the implication of contractual obligations directly from the hand-book.

Notably, if the parties had intended to prevent the handbook's terms from becoming contractual obligations, they could have accomplished that purpose by making no reference to the handbook in their written agreement. The disclaimer would then prevent the handbook's policies, standing alone, from being construed as an employment contract by implication ( see Lobosco v New York Tel. Co./NYNEX, 96 NY2d 312, 317).

Even if an ambiguity does result from the disclaimer's declaration that the handbook should not be read to create any contract, the result is the same. Summary judgment is not precluded where, as here, resolution of a contractual ambiguity does not depend on extrinsic evidence. In such a case, the dispute "can and should be resolved on the basis of the agreement alone" ( Hudson-Port Ewen Assoc., v Chien Kuo, 165 AD2d 301, 303, affd 78 NY2d 944; see Sutton v East Riv. Sav. Bank, 55 NY2d 550, 554; B.T.R. E. Greenbush v General Ace. Co., 206 AD2d 791, 792, lv denied 84 NY2d 808). In interpreting such an agreement, as with any contract, the goal should be a practical construction of the language used so that the reasonable expectations of the parties are realized ( see Sutton v East Riv. Sav. Bank, 55 NY2d at 555; Hudson-Port Ewen Assoc., v Chien Kuo, 165 AD2d at 303-304; Tougher Heating Plumbing Co. v State of New York, 73 AD2d 732, 733). The parties' reasonable expectations are not met by defendant's interpretation, which leads to the absurd and self-contradictory result that inclusion of a term in the handbook defeats the employment agreement's clear purpose to include the handbook's terms. "Where . . . a literal construction defeats and contravenes the purpose of the agreement, it should not be so construed" ( Tougher Heating Plumbing Co. v State of New York, 73 AD2d at 733 [citation omitted]). Instead, "not merely literal language, but whatever may be reasonably implied therefrom [may] be taken into account" ( Sutton v East Riv. Sav. Bank, 55 NY2d at 555). Defendant's express agreement to the handbook's terms and conditions reasonably implies that the parties did not intend the disclaimer to make this agreement ineffective but, rather, intended the handbook's substantive terms and conditions — including the tuition reimbursement provision — to be contractually binding. In our view, this is the "only reasonable interpretation" of the agreement ( B.T.R. E. Greenbush v General Acc. Co., 206 AD2d at 792). Plaintiff is therefore entitled to judgment as a matter of law, and we accordingly grant its cross motion.

Although plaintiff did not appeal from Supreme Court's denial of its cross motion for summary judgment, this Court nevertheless has the authority to search the record and grant plaintiff summary judgment in this matter (see CPLR 3212 [b]; Merritt Hill Vineyards v Windy Hgts. Vineyard, 61 NY2d 106, 110-111; Peter Scalamandre Sons, Inc. v State of New York, 65 AD3d 774, 777 [20091; Sherba v Midstate Precast Sys., 230 AD2d 944, 946).

Ordered that the order is modified, on the law, with costs to plaintiff, by reversing so much thereof as denied Plaintiff's cross motion; cross motion granted and summary judgment awarded to plaintiff; and, as so modified, affirmed.