Credible Behavioral Health v. Johnson
220 A.3d 303
Md.2019Background
- Credible Behavioral Health ran a tuition-loan program; employees signed an unsecured promissory note tying repayment percentages to how long they remained employed after completing a degree.
- Emmanuel Johnson signed the note on August 10, 2016, received $12,529, and was fired in December 2017 before completing a degree; he made one small payment and defaulted.
- Paragraph 1(a) of the note set percentage repayment tiers for termination within 12/24/36 months; a following clause stated the appropriate percentage "shall be due and payable (i) ninety (90) calendar days after the termination of your employment, whether by you or the Company…".
- The District Court found for Johnson, reading Paragraph 1(a) to apply only when an employee quits; the Circuit Court, on appeal on the record, affirmed, stating the district court was not "clearly erroneous."
- The Court of Appeals granted certiorari, held that (1) on appeals on the record a circuit court reviews district-court factual findings for clear error and legal conclusions de novo, and (2) the promissory note requires repayment upon termination whether the employee quits or is fired; it reversed the circuit court.
Issues
| Issue | Plaintiff's Argument (Credible) | Defendant's Argument (Johnson) | Held |
|---|---|---|---|
| Standard of review on appeal from district to circuit under Md. Rule 7–113(f) | Circuit court should review contract interpretation de novo (legal question) | District court’s conclusion flowed from factual findings and thus is reviewed for clear error; outcome should stand | Circuit courts review district-court factual findings for clear error and legal conclusions de novo; circuit court erred by applying only the clearly erroneous standard to the contract interpretation |
| Whether promissory note requires repayment when employee is fired or only when employee quits | Note requires repayment upon termination regardless of whether employee quits or is fired (Paragraph 1(a) read with the following clause) | Paragraph 1(a) applies only to voluntary termination (quitting), so Johnson owes nothing because he was fired | Note, read as a whole and in context, requires repayment after termination whether by employee or company; Credible’s interpretation is the reasonable one |
| Applicability of construing ambiguities against drafter (contra proferentem) | Note not ambiguous; contra proferentem not triggered | Any inconsistency should be construed against Credible as drafter | Court found the contract not ambiguous and therefore did not apply the drafter-construction rule |
| Waiver or forfeiture based on Johnson’s entry into a payment plan and single payment | Credible argued Johnson waived challenges by entering payment plan and making a payment | Johnson argued Credible forfeited that argument by not raising it below | Court declined to decide waiver/forfeiture because it resolved the case on the promissory-note interpretation |
Key Cases Cited
- Friendly Fin. Corp. v. Orbit Plymouth Chrysler Dodge Truck, 835 A.2d 1197 (Md. 2003) (analogizing standards of review and noting legal questions are reviewed de novo)
- Ryan v. Thurston, 347 A.2d 834 (Md. 1975) (discusses scope of review when circuit court reviews district-court judgments)
- Myers v. Kayhoe, 892 A.2d 520 (Md. 2006) (contract interpretation and ambiguity are legal questions reviewed de novo)
- Ocean Petroleum Co. v. Yanek, 5 A.3d 683 (Md. 2010) (interpretation focuses on objective intent and contract context)
- Davis v. Davis, 372 A.2d 231 (Md. 1977) (clear error standard does not apply to legal questions)