Fernekes v. CMP Industries, Inc.
| Decision Date | 21 November 1963 |
| Citation | 246 N.Y.S.2d 201,13 N.Y.2d 217 |
| Parties | , 195 N.E.2d 884, 49 Lab.Cas. P 18,885 Roland J. FERNEKES et al., Respondents, v. CMP INDUSTRIES, INC., et al., Appellants. |
| Court | New York Court of Appeals Court of Appeals |
John J. Clyne and J. Vanderbilt Straub, Albany, for appellants.
Charles E. Nichols, Albany, for respondents.
This is an appeal by permission of the Appellate Division, Third Department, from a final judgment in an equity action in favor of the plaintiffs. The action was commenced for the adjudication of plaintiffs' rights under a 'Salaried Employees' Retirement and Profit Sharing Program of Consolidated Metal Products Corporation' (hereafter called Plan). The name of the corporation was subsequently changed to CMP Industries, Inc. (hereafter called Company), one of the named defendants in the action. The other named defendant, The National Commercial Bank and Trust Company of Albany, was a designated trustee.
The Plan was established by the Company for eligible salaried employees on May 31, 1957. An eligible salaried employee was one who had completed three years of continuous service, or the date he attained the age of 30 years, whichever was later. It should be noted that this did not include those employees who worked for an hourly wage. Employees eligible on the effective date of the Plan became members as of that date, and other employees were to become members as they became eligible. The Plan, including retirement and profit sharing provisions, and trust agreements, is set forth in a lengthy document, evidently drawn with meticulous care. The money for the Plan was contributed solely by the Company, although some of it might otherwise have been distributed as bonuses. It should be noted that the Plan did not come into existence as a result of any bargaining agreement between employees and the Company and, although the salaried employees were told about it, they had nothing to do with its creation.
The Company operated two divisions, separately at least for accounting purposes, although some of the salaried employees performed duties with both divisions. One division, the Transportation Division, manufactured mechanical and electrical equipment; and the other, the Ticonium Division, manufactured dental and laboratory equipment, including dental alloys. On October 31, 1958, the Company sold the Transportation Division to another concern known as the Midland-Ross Corporation. As a result of that sale the plaintiffs, and several others, lost their employment with the Company. The plaintiffs went with Midland-Ross.
In this action the trial court held that the sale of the Transportation Division effectively discontinued the operation of the Plan in that division, and plaintiffs were entitled to be paid their proportionate shares of the trust funds set up under the Plan. An interlocutory judgment to that effect was granted, which the Appellate Division unanimously affirmed, and thereafter final judgment was entered.
As may be seen from the foregoing the provisions of the Plan itself must be the criteria for a proper disposition of the controversy, and the pertinent provisions, as we view them, are as follows:
'Part One
'Administrative and General Provisions
'SECTION 2. MEMBERSHIP
'(3) An Employee's membership in the Program shall terminate if he dies, or if his Continuous Service is broken other than by reason of retirement under the Program, except that he may retain an interest in the Profit Sharing Plan in accordance with the provisions thereof.
'SECTION 4. GENERAL PROVISIONS
'(1) The establishment of the Program or any Plan thereunder shall not be construed as conferring any legal rights upon any Employee for a continuation of employment, nor shall it interfere with the right of the Company to discharge any employee and to take any action with reference to any Employee without regard to the effect which such action might have upon such Employee under the Program or any Plan thereunder.
'Part Two
'Retirement Plan
'SECTION 7. CERTAIN RIGHTS AND LIMITATIONS
'(3) The Retirement Plan may be discontinued at any time by the Board of Directors. In the event of the discontinuance of the Retirement Plan, the Trustee shall hold the assets of the Plan for the sole and exclusive benefit of Members, retired Members and their beneficiaries, including the payment of taxes referred to in Subsection (2) above, and no part of such assets shall in any circumstances be paid to or for the use of the Company prior to the satisfaction of all liabilities under the Retirement Plan, provided, however, that such excess assets as may exist because of an erroneous actuarial computation shall be returned to the Company. Upon discontinuance of the Retirement Plan, the Committee shall determine on the basis of actuarial valuation the share of assets allocable to Members, retired Members and beneficiaries in the following order:
'First, each retired Member or his designated beneficiary shall be entitled to a share equal to the actuarial reserve required to provide the remaining benefits to which he had become entitled under Section 3, Subsection (6) of the Retirement Plan. Second, the remaining assets of the Trust shall be allocable to Members, retired Members and their beneficiaries on the basis and to the extent of the value of the actuarial reserves which have accrued to each of them for other benefits under the Retirement Plan, at the date of discontinuance of the Plan.
'Part Three
'Profit Sharing Plan
'SECTION 3. ALLOCATION OF COMPANY CONTRIBUTIONS AND EARNINGS OR LOSSES OF THE TRUST
'(1) The Company's contribution for each year shall be allocated in the following manner as of May 31 among Members who were such or who became such on that date, but not including Members who have retired or otherwise terminated their employment. Each Member shall be credited with an amount which is in the proportion to the total annual contribution of the Company for the benefit of Members who are Employees of the Division of the Company by which the Member is employed which his Compensation from that Division of the Company bears to the total of all Compensation of all Members from that Division of the Company as of that date.
'(2) The fact that an allocation has been made as hereinbefore provided shall not operate to vest in a Member any right, title or interest in and to any assets of the Profit Sharing Plan Trust. Vesting of such interests shall be accomplished only at the times and on the contingencies hereinafter set forth in this Profit Sharing Plan.
'SECTION 5. TERMINATION OF EMPLOYMENT BENEFITS
'(1) When a Member ceases to be an Employee except at retirement or death, the interest and rights of such Member shall be limited to those contained in the following Subsections of this Section 5. '(2) On such termination of employment, the Member shall be entitled to a percentage of the full amount standing to his account as of the last Valuation Date preceding his termination of employment, such account to be adjusted for gains or losses between the Valuation Date and the last business date preceding termination of employment, determined by the number of his completed years of membership in the Plan, as follows:
"Number of Years Vested Equity
"Less than 5 years 0% (emphasis supplied)
"5 years but less than 6 years 25%
"6 years but less than 7 years 30%
.
The effect of the section relating to Termination of Employment Benefits becomes immediately apparent. Plaintiffs had no vested equity in the amounts credited to their accounts because they had been members of the Plan for less than five years and there is no proof in the record, and plaintiffs do not claim, that they had reached retirement age at the time their connection with the Company was severed. The only possible theory upon which they...
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