Ennis Business Forms, Inc. v. Gehrig

• Decision Date: 19 February 1976
• Docket Number: No. 5502,5502
• Citation: 534 S.W.2d 183
• Parties: ENNIS BUSINESS FORMS, INC., Appellant, v. Leonard F. GEHRIG, Appellee.
• Court: Texas Court of Appeals

Page 183

534 S.W.2d 183

ENNIS BUSINESS FORMS, INC., Appellant, v. Leonard F. GEHRIG, Appellee.

No. 5502.

Court of Civil Appeals of Texas,

Waco.

Feb. 19, 1976.

Rehearings Denied March 18, 1976.

Jackson, Walker, Winstead, Cantwell & Miller, Ralph E. Hartman, Jack Pew, Jr., Dallas, for appellant.

Burleson, Bondies, Baldwin & Pate, Jack C. Pate, Dallas, for appellee.

HALL, Justice.

The appellant, Ennis Business Forms, Inc., provides a retirement plan for its employees, including disability retirement, which is wholly funded by the company. Leonard F. Gehrig, the appellee, brought this suit against the appellant, and the individual members of the 'retirement committee' who administered the plan, challenging a decision by the committee that resulted in termination of payment of disability retirement benefits to him under the plan. The main issues on the trial were whether the committee's decision to end Gehrig's disability benefits was made in bad faith; and whether Gehrig was in fact disabled as that term is defined in the retirement plan. Trial was to a jury which found both bad faith and disability. Upon these findings, judgment was rendered awarding Gehrig a recovery against only the company for (1) disability benefits not paid between the date of their termination and the date of trial, and (2) a sum representing the disability payments Gehrig would purportedly be entitled to receive for the remaining term of the applicable plan provisions. The judgment provided, further, that Gehrig take nothing against the members of the retirement committee. Only the company appeals.

The company's pension plan was adopted on January 1, 1957. Normal retirement under the plan begins for an employee when he attains the age of 65 years, or when he complete 45 years service, whichever is earlier. In other pertinent parts the plan provides as follows:

2.4--DISABILITY RETIREMENT AND RETIREMENT INCOME.

(A) Definition: A participant may retire from the service of the company under the plan if he becomes totally and permanently disabled, as defined in Paragraph (B) of this Section 2.4, on or after the effective date of the plan but prior to his normal retirement date. Such retirement from the service of the company shall herein be referred to as disability retirement.

(B) Total And Permanent Disability: A participant will be considered totally disabled if, in the opinion of the retirement committee, he is disabled, due to sickness or injury, and such disability, in the opinion of the retirement committee, is likely to be continuous and permanent . . . such that the participant is completely unable to perform any and every duty pertaining to his occupation; provided, however, after such disability has continued for a period of 30 months from its date of commencement, as determined by the retirement committee, such participant shall, for the purposes of this plan, be considered fully recovered from such disability unless at that time, due to such disability, such participant is unable to engage in any reasonable occupation, where 'reasonable occupation' means any occupation which other individuals who have an educational background similar to that of the participant, and are in good health, are actually engaged in as their principal means of financial support; and further provided, that at the end of a 66-month period commencing with such date of commencement of disability such participant shall be considered fully recovered for purposes of this plan unless at that time, due to such disability, he is wholly prevented from engaging in any occupation for wage or profit. Any opinion of the retirement committee rendered in accordance with the provisions of this section shall be final and conclusive and shall not be subject to review by anyone.

(D) Proof of Disability: The retirement committee before approving the payment of any disability retirement income shall require satisfactory proof, in the form of a certificate from a duly licensed physician selected by the retirement committee, that the participant has become disabled as provided herein. Every six months after commencement of disability retirement income, or more frequently, the retirement committee may similarly require proof of the continued disability of the participant.

(F) Recovery From Disability: If the retirement committee finds that the participant who is receiving disability retirement income is, at any time prior to his normal retirement date, no longer disabled, as provided herein, the retirement committee shall direct that the retirement income be discontinued . . .

5.4--RULES AND REGULATIONS OF RETIREMENT COMMITTEE.

The retirement committee shall have the authority to make such rules and regulations, and to take such actions as may be necessary to carry out the provisions of the plan, and will, subject to the provisions of the plan, decide any questions arising in the administration, interpretation and application of the plan--which decisions shall be conclusive and binding on all parties. The retirement committee may delegate so much of its authority and duties as it deems expedient.

5.5--POWERS OF RETIREMENT COMMITTEE.

In order to effectuate the purposes of the plan, the retirement committee shall have the power to construe the plan, to supply any omissions therein, to reconcile and correct any errors or inconsistencies, and to make equitable adjustments for any mistakes or errors made in the administration of the plan, and all such action or determinations made by the retirement committee in good faith shall not be subject to review by anyone.

5.8--APPLICABLE LAW.

The plan will be construed and enforced according to the laws of the State of Texas, and all provisions of the plan will be administered according to the laws of the said State.

Answering special issue no. 1, the jury found that the retirement committee acted in bad faith when it terminated Gehrig's disability retirement benefits on June 17, 1974. In connection with this issue, the jury was instructed that the term 'bad faith' meant 'that the person doing the act must have had knowledge of such substantial facts and circumstances as to create in his mind a suspicion that there was something wrong and in spite of such suspicion, intentionally disregards and refuses to learn the facts from the means of knowledge which he knows are at hand.'

In its answers to special issues nos. 2, 3, 4, and 5, the jury found that Gehrig became totally and permanently disabled beginning March 1, 1974. The jury was instructed that 'total disability' meant 'that a person is unable to engage in any reasonable occupation which other individuals who have an educational background similar to that of the person, and are in good health, are actually engaged in as their principal means of financial support'; and that the term 'permanent' meant that a person is 'continuously, wholly and permanently prevented from engaging in any occupation for wage or profit.' Although these definitions are not in question, it should be noted that they were taken directly from the retirement plan.

The company objected to the court's definition of bad faith on the ground that it was taken from the law of negotiable instruments and, for that reason is inappropriate to this suit. It tendered this definition and requested instruction to the jury: 'By the term 'bad faith' is meant dishonestly, with fraud, collusion or deceit.' The objection and requested instruction were overruled and refused. The company's assignments of error to these rulings are overruled.

To preserve error relating to a definition contained in the court's charge, it was incumbent on the company to object to the definition, 'point out distinctly the matter to which (it) objects and the grounds of (its) objection.' Rules 272 and 274, Vernon's Tex.Rules Civ.Proc. The source of a definition submitted to a jury is of no consequence if the definition is not otherwise objectionable under the record, and the company's objection on this ground does not meet the quality of specificity required by the Rules.

Moreover, within the context of this case, the company's tendered definition of 'bad faith' is too restrictive. Under the express terms of § 5.5 of the plan, and the law of this State as expressed in Neuhoff Brothers Packers Management Corp. v. Wilson, (Tex.Sup., 1970) 453 S.W.2d 472, the retirement committee is tied to a good faith standard of conduct in the performance of its duties. As used here in relation to a decision-making process critical to the welfare of the employees for whom the plan is funded by the company, and to the company-employee relationship, the term 'good faith' necessarily means more than the legalistic level of honesty required by the appellant's tendered definition, and prohibits also arbitrary and capricious activity by the committee. In other words, the requirement in the plan of good faith activity by the retirement committee is obviously designed to prevent arbitrary decisions as well as those patently dishonest. See Bruner v. Mercantile National Bank, (Tex.Civ.App.--Dallas, 1970, writ ref., n.r.e.) 455 S.W.2d 323, 327; McHorse v. Portland General Electric Company, (1974) 268 Or. 323, 521 P.2d 315, 319; Marsh v. Greyhound Lines, Inc., (5th Cir.Ct.App., 1974) 488 F.2d 278, 280; Hainline v. General Motors Corporation, (6th Cir.Ct.App., 1971) 444 F.2d 1250, 1257. The company's definition was properly refused.

The company asserts that the evidence is legally and factually insufficient to support the jury's finding of bad faith by the committee, even under the definition submitted to the jury. We are bound to review this complaint, and others like it, under the rules set forth in In re King's Estate, 150 Tex. 662, 244 S.W.2d 660, 661 (1951). It must be noted, however, that because the definition of 'bad faith' submitted to the jury was not properly challenged on the trial, our resolutions of the questions of sufficiency of proof to...