Opinion
No. C8-98-914.
Filed November 10, 1998.
Appeal from the District Court, Hennepin County, File No. 9712532.
Craig M. Roen, James R. Harries, Faricy Roen, P.A., (for appellant).
C. Erik Hawes, Larkin, Hoffman, Daly Lindgren, Ltd., and Watson B. Tucker, (for respondents).
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1996).
UNPUBLISHED OPINION
Appellant challenges the district court's declaratory judgment, claiming that the court erred by incorrectly interpreting contract language, by denying appellant's claim for prejudgment interest, and by denying his request for attorney fees. We affirm.
FACTS
In August 1993, appellant Douglas Donovan was employed by Pecos River Learning Centers, Inc. In September 1994, after respondent Aon Corporation acquired Pecos River Learning Centers, Donovan and Aon entered into a written employment agreement. On December 15, 1995, Donovan and Aon executed the second amendment to the employment agreement. One section of that amendment states:
Employee shall receive an award of 5,629 shares of Aon Corporation * * * common stock, $1.00 par value per share (the "Award Shares") pursuant to the Aon Stock Award Plan (the "Plan"). The terms and conditions of the Award Shares shall be governed by the Plan except that the Award Shares shall vest in the following increments on the dates shown:
1,126 12/31/96 1,126 12/31/97 1,126 12/31/98 1,126 12/31/99 1,126 12/31/2000.
The second amendment to the employment agreement also requires the forfeiture of any unvested award shares if a recipient resigns or is terminated for cause. Paragraph 5 of that contract further provides that if an employee is terminated without cause, his Base Pay for the remainder of the calendar year and any Award Shares vesting during such calendar year in which such termination occurs shall be paid. * * * [I]f termination by the Company of Employee's employment without cause occurs coincident with the termination of the employment or consultancy of Larry Wilson or Elizabeth Wilson, then all Base Pay due through December 31, 2000, and unvested Award Shares (or the cash equivalent thereof, at Aon's option) shall be payable or distributed, as the case may be, through December 31, 2000.
On December 31, 1995, the parties executed the award agreement under the Aon stock award plan. The vesting schedule set forth in that contract differs slightly from the vesting schedule found in the second amendment to the employment agreement and states:
Terms and Conditions of Awards
The Award shall vest after an Award Participant's period of continuous employment by the Corporation in accordance with the schedule set forth below:
Award Recipient's Full Years of Continuous Service
Employment from Award Date Percent Vested Per Year
1 20 2 20 3 20 4 20 5 20
The award agreement under the Aon stock award plan also states "the Corporation shall deliver to the Award Recipient a stock certificate covering the requisite number of shares" within thirty days "of the vesting of any portion of the Award." Through the award agreement, Aon was granted "the discretion to discharge * * * its obligation * * * by paying to the Award Recipient an amount of money equal to the fair market value" of the vested shares.
In light of the conflict between the award agreement and the second amendment to the employment agreement, the parties executed the first amendment to the award agreement, stating:
To the extent there is a conflict between the terms of the Award Agreement regarding the vesting schedule or continued vesting on the happening of certain events thereunder and the terms of that certain Second Amendment to Employment Agreement executed by and between Recipient and Pecos River Learning Centers, Inc. dated December 18, 1995 (the "Employment Agreement"), then the terms of the Employment Agreement shall control the conflict.
Except as modified by the first amendment to the award agreement, the award agreement remains "unmodified and in full force and effect."
On June 14, 1996, Donovan's position was eliminated and his employment with Aon was terminated without cause. At some point, Donovan and Aon executed an Aon stock award plan deferral election form. Through that form, Donovan elected to defer distribution of the 1,126 shares vesting in 1996. The form is silent about the circumstances of distribution. On April 23, 1997, Donovan demanded that Aon distribute the 1,126 shares vested for the year ended December 31, 1996, and Aon complied with that request on June 30, 1997.
In August 1997, Donovan commenced this declaratory judgment action alleging that the language of these contracts entitles him to the continued vesting of the award shares through 2000, that he is entitled to prejudgment interest on the shares he has already received, and that he is entitled to attorney fees. The district court granted Aon's cross-motion for declaratory judgment.
DECISION
On appeal from a declaratory judgment, we apply a clearly erroneous standard to the factual findings, but review the district court's determinations of law de novo. Rice Lake Contracting v. Rust Env't Infrastructure , 549 N.W.2d 96, 98-99 (Minn.App. 1996), review denied (Minn. Aug. 20, 1996).
The uniform declaratory judgment act empowers district courts "to declare rights, status and other legal relations whether or not further relief is or could be claimed." Minn. Stat. § 555.01 (1996).
Any person interested under a * * * written contract * * * may have determined any question of construction or validity arising under the * * * contract * * * and obtain a declaration of rights, status, or other legal relations thereunder.
Minn. Stat. § 555.02 (1996).
The purpose of construing a contract "is to give effect to the intention of the parties as expressed in the language they used in drafting the whole contract." Art Goebel, Inc. v. North Suburban Agencies , 567 N.W.2d 511, 515 (Minn. 1997). The intent of the parties is ascertained from a process of synthesis in which the provisions are given a meaning consistent with the obvious purpose of the contract as a whole. Republic Nat'l Life Ins. v. Lorraine Realty Corp., 279 N.W.2d 349, 354 (Minn. 1979). A contract should be interpreted in a way that gives all of its provisions meaning. Current Tech. Concepts, Inc. v. Irie Enters., 530 N.W.2d 539, 543 (Minn. 1995). The meaning of a contract and whether a contract is ambiguous are legal determinations that we review de novo. See id.
I.
Donovan argues that the phrase, "the Award Shares shall vest" in the second amendment to the employment agreement means that the shares shall vest regardless of his employment status. Specifically, Donovan contends that his continued employment is not a necessary precondition to the vesting of the award shares through 2000.
Despite Donovan's contention to the contrary, the relevant contract provisions work together unambiguously to require Donovan's continued employment for the shares to vest in the years 1997-2000. The second amendment to the employment agreement specifically modifies the agreement to provide that any unvested shares will be forfeited when a recipient's employment is terminated "with cause or * * * by resignation." Additionally, the second amendment to the employment agreement requires that "any Award Shares vesting during such calendar year in which" a recipient is terminated without cause "shall be paid" by Aon. When read together, these provisions reveal the purpose of the agreements — to award employees terminated without cause the shares vesting in the year of termination but to require forfeiture of the shares not vesting in that year.
Supporting this interpretation of the relevant provisions is the doctrine that encourages courts to avoid interpretations that render contract provisions meaningless. See Independent Sch. Dist. No. 87 v. Loberg Plumbing Heating Co., 266 Minn. 426, 436, 123 N.W.2d 793, 799-800 (1963). Donovan contends that, because he was terminated without cause, his award shares should continue to vest until 2000. However, if we adopt Donovan's interpretation, two sentences in the second amendment to the employment agreement would be rendered redundant and meaningless. The first sentence of paragraph 5 states, "[u]pon termination * * * of Employee's employment without cause, * * * any Award Shares vesting during such calendar year in which such termination occurs shall be paid." Under Donovan's interpretation, it would be unnecessary to state that the unvested shares vest for the year of termination because the unvested shares would automatically vest for the year of termination and all other years through 2000.
Similarly, the second sentence of paragraph 5 in the amended employment agreement would be redundant under Donovan's interpretation. That sentence provides that "unvested shares (or the cash equivalent thereof, at Aon's option) shall be payable or distributed * * * through December 31, 2000" if the termination of Donovan without cause "occurs coincident with the termination * * * of Larry Wilson or Elizabeth Wilson." If Donovan's interpretation were correct, there would be no need to specifically provide that the unvested shares would continue to vest in that unique situation. After all, those unvested shares would continue to vest through 2000 even if Larry and Elizabeth Wilson were not coincidentally terminated without cause.
Contrary to appellant's assertion, the second sentence of paragraph 5 of the second amendment to the employment agreement was not included to grant Aon the option of awarding "the cash equivalent" of the vested shares in such a situation. That option was already provided by paragraph 2 of the award agreement which allows Aon to pay "an amount equal to the fair market value of all or a portion of the undelivered shares" to Award recipients. Because the option of distributing a cash equivalent was included in both the award agreement and the second amendment to the employment agreement, it was not the sole purpose of paragraph 5 of the second amendment to the employment agreement to create that option.
The relevant contract language requires forfeiture of Donovan's unvested shares for the years 1997-2000, and we affirm the declaratory judgment.
II.
We also affirm the declaratory judgment rejecting Donovan's claim that he is entitled to prejudgment interest on the shares that vested in 1996. The award of interest lies within the sound discretion of the district court as a matter of just compensation and will not be disturbed absent an abuse of that discretion. In re Estate of Renzykowski , 409 N.W.2d 888, 892-93 (Minn.App. 1987); see also McKay's Family Dodge v. Hardrives, Inc., 480 N.W.2d 141, 148-49 (Minn.App. 1992) (holding that district court did not abuse its discretion in award of prejudgment interest from date of unwritten order), review denied (Minn. Mar. 26, 1992).
Minn. Stat. § 549.09, subd. 1(a) (1996), provides:
When a judgment or award is for the recovery of money, * * * interest from the time of the verdict, award or report until judgment is finally entered shall be computed * * * and added to the judgment or award.
This statute "contemplates situations where a settlement offer is made and later, after the case has been tried, a judgment is entered that is more or less than the offer." Stinson v. Clarke Equip. Co., 473 N.W.2d 333, 336 (Minn.App. 1991), review denied (Minn. Sept. 13, 1991).
Three factors support the district court's conclusion that Donovan is not entitled to prejudgment interest. First, because Donovan received the shares vested in 1996 more than a month before he initiated this action, he did not receive the shares as a result of an "award or judgment." See Great West Cas. Co. v. Barnick , 529 N.W.2d 504, 506 (Minn.App. 1995) (plain and ordinary meaning of "judgment" relates to judicial decision or judicial proceedings). This court has held that prejudgment interest to be paid under Minn. Stat. § 549.09 does not apply to settlements reached prior to litigation. See, e.g., Great West Cas. Co. v. Barnick , 542 N.W.2d 400, 401-02 (Minn.App. 1996) (holding that insurer's statutory responsibility for prejudgment interest does not apply to prelitigation settlements).
Second, it is not clear that Donovan had a contractual right to the vested shares until he demanded them in April 1997. Under the award agreement, Aon was obligated to deliver the shares vesting December 31, 1996, by January 30, 1997. However, Donovan completed an Aon stock award plan deferral form through which he chose to defer 100% of the shares vesting on December 31, 1996. It appears that this deferral relieved Aon of its obligation to distribute the award shares in January 1997.
Third, the record does not show that Aon refused to distribute the shares at any time. When Donovan eventually demanded distribution, Aon complied with that request. It was certainly reasonable for Aon to hold the shares until it received instructions for distribution from Donovan. For each of these reasons, the district court correctly concluded that Donovan is not entitled to prejudgment interest on the shares that vested on December 31, 1996.
III.
Finally, because nothing in the record indicates that an award of attorney fees is necessary, proper, equitable, or just, the district court did not abuse its discretion, and we affirm the declaratory judgment that Donovan is not entitled to attorney fees under Minn. Stat. §§ 555.08 or 555.10 (1996). See Sazama Excavating v. Wausau Ins. , 521 N.W.2d 379, 382 (Minn.App. 1994) (reversing award of attorney fees and denying attorney fees on appeal where there was no statutory authorization), review denied (Minn. Oct. 27, 1994).