Hadden v. Consolidated Edison Co. of New York, Inc.

• Decision Date: 01 May 1974
• Citation: 34 N.Y.2d 88,356 N.Y.S.2d 249
• Parties: , 312 N.E.2d 445 Gerald R. HADDEN, Respondent, v. CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 249

356 N.Y.S.2d 249

34 N.Y.2d 88, 312 N.E.2d 445

Gerald R. HADDEN, Respondent, v. CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., Appellant.

Court of Appeals of New York.

May 1, 1974.

George J. Wade and Gary W. Sutton, New York City, for appellant.

Victor J. Herwitz and Oren C. Herwitz, New York City, for respondent.

RABIN, Judge.

The issue is whether a pension may be revoked by a private employer when facts are discovered after an employee's retirement which would have been grounds for discharge for cause had they been known during employment, where the pension plan is silent on the point.

The undisputed facts are as follows. Plaintiff-respondent Gerald R. Hadden (Hadden) entered the employ of defendant-appellant Consolidated Edison Company of New York, Incorporated ('Con Edison' or 'Company') in 1931. By June, 1966, he had risen to the position of vice-president in charge of construction. In December, 1967, Hadden participated in a meeting with a prominent political leader and a Con Edison contractor. At this meeting it was suggested that in return for a bribe to the appropriate New York City official, Con Edison could obtain a valuable license necessary for the construction of a power transmission line. Late in December, 1967, or early January, 1968, Con Edison's chairman of the board, Charles F. Luce (Luce), first became aware of Hadden's participation at this meeting. Luce discussed the meeting with Hadden on two occasions and informed Hadden that if he did not retire, he would be discharged for having concealed the bribe-approach from his superiors. Hadden filed a written election pursuant to the 'Early Optional Retirement' provision of the 'Pension Plan for Retirement for Age' (hereinafter 'Pension Plan' or 'Plan'), retired, and began receiving pension payments in February, 1968. ¹

In November, 1969, Hadden testified under grant of immunity at the Federal criminal trial of one of the other participants at the December, 1967 meeting. Hadden admitted, Inter alia, that he accepted cash totaling $15,000 from one of Con Edison's contractors during the course of 1967, that in 1966 he accepted a merchandise certificate in the amount of $1,000 from the same contractor, and that he secured financial gains as a result of dealings with other contractors of Con Edison. Luce obtained a transcript of Hadden's testimony, and upon his recommendation the board of trustees subsequently passed resolutions authorizing the termination of Hadden's pension. ² As of December, 1969, Con Edison refused to make any further pension payments.

Hadden thereupon brought this suit for damages and to compel Con Edison to resume payment of his pension benefits. The Company's answer contained a general denial, affirmative defenses, and counterclaims. claims. Both parties moved for summary judgment; each was partially successful. Con Edison was ordered to reinstate Hadden on its pension rolls with all attendant benefits, and Hadden was ordered to pay the Company $16,000 representing moneys and a gift certificate he had improperly received from a Company contractor. Issues of fact requiring trial were found with regard to Con Edison's claim for an additional $15,750 obtained by Hadden as a result of stock dealings with a Company contractor. The court dismissed Con Edison's claim that Hadden's conduct forfeited his right to retain compensation for the last 17 months of his employment, and that this amount, totaling $68,250, should be offset against any award to Hadden. The Appellate Division affirmed without opinion, and by permission of this court granted February 7, 1973 Con Edison appeals from that portion of the Appellate Division order which affirmed summary judgment ordering Hadden's reinstatement and payment of denied benefits. We do not consider the other aspects of the order.

In support of its termination of Hadden's benefits, Con Edison advances three arguments: (1) the board's action was authorized under the Pension Plan; (2) Hadden's misconduct constituted a 'failure of consideration'; and (3) Hadden's failure to disclose material facts concerning his involvement when questioned by Luce prior to retirement, entitles the Company to rescind its agreement to allow Hadden to retire rather than discharge him.

Of course, in reviewing a grant of summary judgment, we question whether a material, triable issue of fact is presented. For reasons which follow, we reject the first and second arguments above as a matter of law, and these present no factual issue. However, factual issues underlying the third argument defeat the grant of summary judgment. If true, the allegation that Hadden materially and fraudulently misrepresented his involvement in the preretirement discussions with Luce would warrant rescission of the parties' agreement that Hadden's retirement would be a mutually satisfactory resolution under the circumstances. Hadden denies this allegation, presenting a material issue of fact for jury determination.

Both parties properly agree that for the Company's action to be lawful, it must be authorized in some manner by the pension contract (Gitelson v. Du Pont, 17 N.Y.2d 46, 268 N.Y.S.2d 11, 215 N.E.2d 336; see Fernekes v. CMP Ind., 13 N.Y.2d 217, 220, 246 N.Y.S.2d 201, 202, 195 N.E.2d 884, 885). ³

On the first question of authorization, Con Edison concedes that there is no express provision in the Pension Plan authorizing the termination of benefits after retirement. However, the Company does cite a provision declaring that those discharged for cause will not be entitled to pension rights, ⁴ and a provision declaring that the board of trustees may interpret the Plan, define its application, and make rules and regulations for its administration. ^{5 5} Reading these provisions together, Con Edison argues that the board's resolution was a proper exercise of its interpretative power since 'To have decided differently would have been to conclude that the draftsmen intended to pay benefits to the employee who stole money every week only if he managed to conceal it up to the day of retirement'. However, the section purportedly granting authority to the board, besides referring to the board's power as 'interpretation', specifically limits this power in that 'no rule, regulation, interpretation or action shall be inconsistent with any provisions of the Plan.' In examining the Plan to determine consistency, we find another provision which reserves the right to Con Edison to 'amend, modify or terminate in whole or in part the Plan * * * upon six (6) months' notice to its then employees * * * No such amendment or modification shall retroactively affect adversely employees' benefits under the Plan.' (§ X, subd. (A), Right to Terminate or Modify.)

The board's action, though denominated 'interpretation', constitutes a sufficiently drastic wrenching of the Pension Plan, which contains no provision authorizing postretirement termination, that it more closely resembles a modification or amendment (see 3 Corbin, Contracts, § 534, p. 11; see, generally, People ex rel. Twenty-Third St. R.R. Co. v. Commissioners of Taxes, 95 N.Y. 554, 559; Matter of Adams, 3 Misc.2d 12, 14, 155 N.Y.S.2d 165, 167; Matter of Burri v. Kern, 180 Misc. 74, 39 N.Y.S.2d 640). The board did not give the required six months' notice for a modification; and, more significant, the board's action is a modification which retroactively affects employees' benefits under the Plan and is therefore unauthorized under the provision governing modifications. Even assuming the board's action could be viewed as an 'interpretation' of the Plan rather than, as is apparent, a modification or amendment, it would be inconsistent with the above provision clearly requiring that even these more drastic changes cannot retroactively affect employees' benefits. A fair reading of the contract suggests that what cannot be done by modification and amendment cannot be done by 'interpretation'. However viewed, the board's action is unauthorized by the Pension Plan.

Con Edison's second argument, that Hadden's misconduct constitutes a 'failure of consideration' excusing its payment of pension benefits, is also unpersuasive. As utilized by Con Edison, the claim of 'failure of consideration' charges Hadden with a breach of performance under the Pension Plan contract. ⁶ However, Con Edison is unable to cite to a provision in the Plan imposing any condition upon the payment of the pension other than age, length of service, and absence of discharge for cause. The provision under which Hadden retired unequivocally states that employee who attains the proper proportions of age and accredited service ⁷ 'shall, upon filing a written election * * * be retired * * * from the service of the Company.' Such wording indicates that retirement under the provision is at the employee's option once the age and service requirements are met. (Accord Spencer v. Bullock, 94 U.S.App.D.C. 388, 216 F.2d 54, 55.) Other than the proviso that the Pension Plan shall not be available to an employee who has been discharged or released for cause, there is no other qualification upon the right of a retired employee who has met the age and service criteria to receive pension benefits. ⁸

While there is no language in the Plan expressly conditioning pension payments upon the employee's performing honestly and loyally, there is little difficulty in regarding these qualifications as a constructive condition of Con Edison's duty of performing its promise to make pension payments. (See, e.g., Baltimore County Bd. of Trustees of Employees' Retirement System v. Comes, 247 Md. 182, 230 A.2d 458; Van Coppenolle v. City of Detroit, 313 Mich. 580, 21 N.W.2d 903; Fromm v. Board of Directors, 81 N.J.Super. 138, 195 A.2d 32.) However, constructive conditions are imposed by law to meet the ends of justice (3A Corbin, Contracts, § 653; Restatement, 2d, Contracts, Tentative Drafts No. 1--7, § 255), and it is not every breach of...