Belknap v. Dean Witter & Co., Inc.

• Decision Date: 22 February 1983
• Citation: 460 N.Y.S.2d 1005,92 A.D.2d 515
• Court: New York Supreme Court — Appellate Division
• Parties: Robert E. BELKNAP, III, et ano., co-executors of the estate of Wolfram L. Ertinger, deceased, Plaintiffs-Appellants, v. DEAN WITTER & CO., INC., et al., Defendants-Respondents.

Page 1005

460 N.Y.S.2d 1005

92 A.D.2d 515

Robert E. BELKNAP, III, et ano., co-executors of the estate

of Wolfram L. Ertinger, deceased, Plaintiffs-Appellants, v. DEAN WITTER & CO., INC., et al., Defendants-Respondents.

Supreme Court of New York, Appellate Division,

First Department.

February 22, 1983

J.H. McConnell, New York City, for plaintiffs-appellants. J.G. Steinberg, New York City, for defendants-respondents.

Judgment, Supreme Court, New York County (Helman, J.), entered on September 18, 1981, affirmed. Respondents shall recover of appellants $75 costs and disbursements of this appeal.

All concur except KUPFERMAN, J., who concurs in a memorandum with which KASSAL, J., concurs; SANDLER, J., concurs in a memorandum with which SULLIVAN, J., concurs; and MURPHY, P.J., dissents in a memorandum, all as follows:

KUPFERMAN, J. (concurring)

Plaintiff's decedent (Ertinger), as a retired officer and director of Laird, Bissell & Meeds, Inc. (LB & M), had been a beneficiary of an unfunded pension plan approved by a resolution of LB & M's board of directors on April 4, 1968. Ertinger received monthly pension payments pursuant to the resolution at an annual rate of $18,000 from the date of his retirement, April 1, 1972, until March 31, 1973. Ertinger died on August 23, 1977. His estate now continues this action.

In the early 1970's, LB & M was under pressure from the New York Stock Exchange to remedy its inadequate capitalization by merger or otherwise obtaining new capital. On March 9, 1973, LB & M and Dean Witter & Co., Inc., executed a Memorandum of Understanding outlining the terms of a proposed merger of the two corporations. On April 2, 1973, LB & M and Dean Witter executed a Merger Agreement under the terms of which LB & M was merged into Dean Witter which became the surviving corporation.

Paragraph 8 of the Memorandum of Understanding contained the following language with respect to pension payments authorized by LB & M to its retired employees: "the company surviving the merger ... will continue the special arrangements made with existing and future retired employees of LB & M to the extent agreed upon by the parties." The Merger Agreement contains no specific provision regarding the pension payments. Nor does it contain an integration clause or in any way evince an intent that the provisions of the Memorandum of Understanding be subsumed into the Merger Agreement. The Merger Agreement does contain the general language of the governing Law, Section 259(a) of Delaware Corporation Law, which provides in pertinent part:

"All rights of creditors ... of said constituent corporations shall be preserved unimpaired, and all debts, liabilities and duties of the respective constituent corporations shall henceforth attach to said surviving or resulting corporation, and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred or contracted by it."

By letter dated April 4, 1978, defendant Boyer, a director of Dean Witter, informed Ertinger that under the terms of the merger no provision could be made to continue the pensions or retired directors of LB & M, and that accordingly no further payments would be made. In 1975, Ertinger instituted this suit after learning that Dean Witter was making pension payments to John J.P. Murphy, another retired LB & M director.

Murphy's pension rights, however, arise from a letter agreement dated March 23, 1967, which was authorized by a different board resolution from that which authorized pensions for all retired LB & M directors under which Ertinger asserted his right. The Murphy letter agreement, approved by a resolution of the LB & M board on March 15, 1967, by its terms pertains only to Murphy. Under that letter agreement, Murphy would resign as a director but remain as a registered representative at an annual salary of $25,000 plus commissions until such time as he chooses to retire at an annual pension of $18,000.

Both the Murphy agreement and the 1968 resolution authorizing pensions for all retired LB & M directors contain substantially identical language as follows:

"If in any particular month the corporation's income shall be insufficient to pay such pension and officers' salaries as herein provided, such pension shall be reduced pro rata with any reduction in officers' salaries; ... Notwithstanding any provision hereof, in the event that the broker-dealer business presently being conducted under the name and good will of the corporation shall cease by reason of liquidation of the corporation or any successor firm, whether voluntary or involuntary, the liability hereunder to you shall cease."

The 1968 resolution, however, contained the following language not found in the Murp agreement: "in the case of merger, the firm would attempt to have the pension continued, but could not, of course, guarantee that this would be the case."

Dean Witter, upon advice of counsel, determined that the Murphy agreement was a binding debt undertaken by LB & M which Dean Witter was required to assume under the statutory merger, but that the pension rights created under the 1968 resolution were defeasible as provided in the event of merger and were to be a subject of negotiation.

Inasmuch as the Merger Agreement contained no specific provision regarding assumption of the directors' pension obligations, although the Memorandum of Understanding recited that the pension obligations would be assumed only to the extent agreed upon by the parties, the trial justice, in light of this ambiguity, properly considered extrinsic evidence of the parties' negotiations and prior writings to ascertain their intent with respect to the pension obligation at the time they entered the Merger Agreement (Lamb v. Norcross Brothers Co., 208 N.Y. 427, 102 N.E. 564; Broadway Maintenance Corp. v. City of New York, 19 A.D.2d 96, 241 N.Y.S.2d 116). In Lamb, the Court of Appeals stated the rule as follows: "... when the sense in which particular words of a written instrument are used, or the sense in which the promisor had reason to believe the promisee understood them, is determinable from the relation of the parties, facts apart from it, and the surrounding circumstances, it must be found and fixed by the jury. [citations omitted]." 208 N.Y. at 431, 102 N.E. 564. In Broadway Maintenance Corp., this court stated "even in the case of an integrated written contract, the meaning of the words may depend upon various surrounding circumstances that are in dispute; the circumstances must be found as a fact before interpretation can proceed [citations omitted]." 19 A.D.2d at 99, 241 N.Y.S.2d 116.

Appellants argue that the trial court improperly considered evidence extrinsic to the Merger Agreement to determine the parties' intentions, invoking the familiar rule that where a contract is clear and unambiguous its construction is a matter of law to be decided from the instrument itself (see West, Weir & Martel, Inc. v. Mary Carter Paint Co., 25 N.Y.2d 535, 540, 307 N.Y.S.2d 449, 255 N.E.2d 709; Leitman v. Bladwin, 57 A.D.2d 944, 395 N.Y.S.2d 87).

The rule urged by appellants, however, has no application to an incomplete contract which falls within one of the limited exceptions to the parol evidence rule. In Thomas v. Scutt, 127 N.Y. 133, 138, 27 N.E. 961, the Court of Appeals stated the rule as follows: "The writing must not appear upon inspection to be a complete contract, embracing all the particulars necessary to make a perfect agreement and designed to express the whole arrangement between the parties, for in such a case it is conclusively presumed to embrace the entire contract."

Applying the foregoing to the Merger Agreement, it can hardly be said that the Merger Agreement contains all the particulars necessary to make a perfect agreement inasmuch as the agreement is silent regarding assumption of the directors' pension obligations. Moreover, in the absence of an integration clause it cannot be said that the Merger Agreement is designed to express the whole arrangement between the parties.

After denying earlier cross-motions for summary judgment at Special Term, Justice Helman conducted a non-jury trial and dismissed the complaint with prejudice. The evidence presented during the trial, and the affidavits submitted in connection with the cross-motions for summary judgment, demonstrated that Dean Witter never intended or agreed to assume the pension obligations. Former directors of LB & M who negotiated the merger testified that Dean Witter flatly refused to assume the pension obligations on the ground that Dean Witter did not provide pensions for its own retired directors. The former LB & M directors felt that, although they pressed the point, insistence would have caused the merger negotiations to fail which would have been unacceptable to LB & M which was in a weak bargaining position and under pressure from the New York Stock Exchange. The court also admitted two documents probative of Dean Witter's intent. The first, an unexecuted letter agreement from Dean Witter to LB & M, states with respect to the pension agreements referred to in the Memorandum of Understanding: "These arrangements will be made with not exceeding fifteen retired employees and the maximum to any such employee shall not exceed $300 per month." The second is the letter Dean Witter sent to Ertinger two days after the merger informing him that under the terms of the merger the directors' pensions could not be continued. How Dean Witter construed the agreement immediately after its execution is probative of its intent upon entering the Merger Agreement. Cf. Webster's Red Seal Publications, Inc., v. Gilberton World-Wide Publications, Inc., 67 A.D.2d 339, 415 N.Y.S.2d 229.

Special Term correctly denied Ertinger's earlier motion for summary judgment, citing questions of fact regarding the intentions of the parties with respect to the pension obligations. Special Term aptly described...