Detroit Greyhound Emp. Federal Credit Union v. Aetna Life Ins. Co.

• Decision Date: 05 May 1969
• Docket Number: No. 13,13
• Parties: DETROIT GREYHOUND EMPLOYEES FEDERAL CREDIT UNION, a federal corporation, Plaintiff-Appellant, v. AETNA LIFE INSURANCE COMPANY, a foreign corporation, Connecticut General Life Insurance Company, a foreign corporation, and the Greyhound Corporation, a foreign corporation, Defendants-Appellees.
• Court: Michigan Supreme Court

Page 274

167 N.W.2d 274

381 Mich. 683

DETROIT GREYHOUND EMPLOYEES FEDERAL CREDIT UNION, a federal

corporation, Plaintiff-Appellant, v. AETNA LIFE INSURANCE COMPANY, a foreign corporation,

Connecticut General Life Insurance Company, a

foreign corporation, and the Greyhound

Corporation, a foreign

corporation,

Defendants-Appellees.

No. 13.

Supreme Court of Michigan.

May 5, 1969.

Langs, Molyneaux & Armstrong, John F. Langs, Richard J. Langs, and Robert M. Hetchler, Detroit, for plaintiff-appellant.

Miller, Canfield, Paddock & Stone, John W. Gelder, Detroit, for defendants-appellees.

Before the Entire Bench.

BLACK, Justice.

Two quotations, dating back to 1886 and 1887 respectively, will serve to present for application to this case a mature rule of interpretive contract law:

'The facts and circumstances attending the making of a contract are indispensible to a correct construction or interpretation thereof, and if it is executory, and its terms uncertain or ambiguous, the manner in which the parties themselves have treated it in carrying it into effect is entitled to great weight as affording a practical construction which the parties themselves have placed upon its intent and meaning.' (Switzer v. Pinconning Mgf. Co., 59 Mich. 488, 493, 26 N.W. 762, 764).

'If there were any doubt or ambiguity arising upon the words employed in the clause of the contract under consideration they would be effectually removed by this practical construction continuously put upon them by the conduct of the parties for so long a period.

"In cases where the language used by the parties to the contract is indefinite or ambiguous, and hence of doubtful construction, the practical interpretation of the parties themselves is entitled to great, if not controlling, influence. The interest of each generally leads him to a construction most favorable to himself; and when the difference has become serious, and beyond amicable adjustment, it can be settled only by the arbitrament of the law. But in an executory contract, and where its execution necessarily involves a practical construction, if the minds of both parties concur, there can be no great danger in the adoption of it by the court as the true one." (Topliff v. Topliff, 122 U.S. 121, 131, 7 S.Ct. 1057, 1062, 30 L.Ed. 1110). ¹

The facts in general that are required for determination of this contractually based action appear in that portion of the trial judge's opinion which Division I has copied (Detroit Greyhound Employees Credit Union v. Aetna Life Ins. Co., 7 Mich.App. 430, 433--436, 151 N.W.2d 852). Additional specific facts, all undisputed, will be supplied.

Without hinting at agreement or disagreement with treatment below of the precedently posed questions (Greyhound, supra, at 436--439, 151 N.W.2d 852), we think our Brethren of the Court of Appeals erred decisively when they concluded that the method of performance pursued by the parties to the group annuity contract, continuing as that method did some 14 years with no question raised or reservational notice given, amounted only to a 'mere waiver' which was revocable at all times within the Corbin rule (3A Corbin, Contracts, § 764). ² We find instead that this is a clear case for application of the interpretive rule to which the present opinion directs attention.

The beginning issue in this case is whether, as claimed by the defendant insurance companies and denied by plaintiff, the presently quoted no assignment clause must be interpreted and applied as prohibiting assignments by certified employees of their right, under 'Option B,' to receive refunds of their respective contributions to the annuity plan. That depends upon the presence or absence of ambiguity in the annuity contract and certificates issued thereunder.

Option B does not seem to have been considered by either court below, so far at least as the respective opinions disclose. It appears in each certificate which, by the group annuity contract, the defendant insurance companies agreed to issue for delivery to each participating employee. For convenience we array the no assignment clause with Option B.

The no assignment clause reads:

'Neither the employee, nor the beneficiaries, nor the joint annuitants may assign the annuities or other benefits payable under this contract.'

Section 6 of the employee's aforesaid certificate is headed 'Termination of Employment.' The beginning paragraph proceeds, 'If employment is terminated before the discontinuance of the contracts, the Employee may choose either one of the two following options:'. After Option A comes Option B:

'Option B: to elect, before his Annuity Commencement Date, to receive a refund of his contributions (but not the Employer's contributions), accumulated at 2% Interest per annum, compounded annually, interest being computed separately on each contribution from the end of the contract year in which the contribution was made to the first day of the contract month in which the refund is elected. The Insurance Companies reserve the right to pay such refund to the Employee in 12 monthly instalments, each equal to 8.41% Of such refund. This refund will be in lieu of all benefits under the Contracts to the Employee, to his beneficiary, and to his joint annuitant; except that if this Option B is chosen on or after the discontinuance of the Contracts and if all of the Retirement Annuities purchased for the Employee by Employer contributions have not been cancelled by reason of the Employee's termination of employment before such discontinuance, the Employee will retain a paid-up deferred annuity without death benefit in the form and for an amount determined by the Contracts.' ³

Note how 'This refund' is distinguished from 'all benefits under the contracts.' That phrasing alone, to say nothing of the point of practical construction of the contract documents, leads to conclusion that the best that may be said for the contention of the defendant insurers is this:

Finding that the prohibition against assignment is of 'annuities' and 'benefits' only, and reading that Option B provides that the elective right of a departing employee to 'receive a refund of his contributions' will be 'in lieu of all benefits to the employee,' there at least is some ambiguity here. That ascertained, we may rule only that the mutually agreeable mode of performance of the contract by the parties, between 1941 and 1955, bring the presented question of interpretation directly within the rules quoted at the beginning of this opinion.

It is recognized candidly in Judge Fitzgerald's opinion that 'courts have striven to uphold freedom of assignability.' Indeed, one court prominently quoted in that opinion has repeatedly ruled that those who would compose a contractual bar against alienation must use 'The plainest words'; our reference being to both Allhusen v. Caristo Const. Corp., 303 N.Y. 446, 103 N.E.2d 891, 37 A.L.R.2d 1245 and its predecessor (in which Mr. Justice Cardozo concurred), State Bank v. Central Mercantile Bank, 248 N.Y. 428, 162 N.E. 475, 59 A.L.R. 1473. Consider this language, appearing in both cases:

'Clear language should therefore be required to lead to the conclusion that the certificates are not assignable. 1 Williston on Contracts, § 422. We cannot deduce such consequences from uncertain language. Scheffer v. Erie County Sav. Bank, 229 N.Y. 50, 127 N.E. 474. The plainest words should have been chosen so that he who runs could read, in order to limit the freedom of alienation of rights and prohibit the assignment.'

Now it is quite true that, upon the facts adduced for Allusen, the court found that it had before it 'a clause embodying clear, definite and appropriate language, which may be construed in no other way but that any attempted assignment of either the contract or any rights created thereunder shall be 'void' as against the obligor.' But here, the prohibitory words employed by the defendant insurers considered with the language they themselves inserted in Option B, there is no clear and definite clause as claimed, no use of 'The plainest words,' and at most no more than that kind of contractual doubt which the parties and participants settled conclusively by mutually agreeable performance long before new and technical interpretive thoughts reared themselves for litigatory controversy.

For the foregoing reasons we cannot, unaided by interpretive facts supplied dehors the group annuity contract and the conjoined employee certificates, say that the phrase 'other benefits,' appearing in the no assignment clause, included within its bar the employee's optional right to receive 'a refund of his contributions'...