Moore v. Adkins
| Decision Date | 31 March 1978 |
| Docket Number | No. 49061,49061 |
| Parties | Ralph MOORE et al., Appellants, v. Charles Q. ADKINS et al., Appellees. |
| Court | Kansas Court of Appeals |
Syllabus by the Court
1. When considering a qualified employee benefit plan wherein the plan committee is vested with power to determine all questions as to status and rights of participants and which provides that any determination by the plan committee shall be final and conclusive and that any interpretation of the provisions of the plan document in good faith shall be binding upon all persons acquiring or claiming rights thereunder, judicial review of a decision properly within the discretion of the plan committee is limited to a determination of whether the committee has been arbitrary or has acted in bad faith or in a fraudulent manner.
2. The weight of recent authority holds that, as to employees who continue in their employment for the requisite period of time, a private non-contributory pension plan is a contractual obligation of the employer.
3. When a written instrument is ambiguous, the intent of the parties is not ascertained by resort to literal interpretation but by considering all language employed, circumstances existing when the instrument was made, objects sought to be attained, and other circumstances, if any, which tend to clarify the intent of the parties.
4. Although a vested right under a pension plan may not be limited or abrogated solely because its payment is deferred, the plan itself may provide for abrogation upon occurrence of a condition between vesting and payment.
5. By definition, surcharge is a remedy designed to make the trust estate whole, primarily where losses have been incurred through the negligence or bad faith of the trustee.
6. Where the owner of property receives consideration for making a transfer of the property in trust, the rules applicable to transfers for value and to contracts are applicable, and the fact that the owner made the transfer under a mistake is not of itself a sufficient ground for setting aside the transfer.
7. The test to determine if an alleged agent possessed implied powers is whether from the facts and circumstances of the particular case it appears there was an implied intention to create an agency, in which event the relation may be held to exist, notwithstanding either a denial by the alleged principal or whether the parties understood it to be an agency.
8. A course of business conduct is sufficient to establish implied authority in an officer of a corporation to do a certain act.
9. If by the terms of the trust it is the duty of the trustee to pay or convey the trust property or any part thereof to a beneficiary, he is liable if he pays or conveys to a person who is neither the beneficiary nor one to whom the beneficiary or the court has authorized him to make such payment or conveyance.
10. When the efforts of a party to the action, not the trustee, prove beneficial to the trust estate and result in surcharge of the trustee, reasonable attorney fees to be paid from the trust estate are allowable.
John R. Morse of Fleeson, Gooing, Coulson & Kitch, Wichita, for appellants.
Thomas C. Triplett and Martin W. Bauer of Martin, Pringle, Schell & Fair, Wichita, for appellee L. J. Holgerson.
Gerald E. Weaver and Artie E. Vaughn of Vaughn, Updegraff, Allison & Holloway, Wichita, for appellee Pete Alford.
Before REES, P. J., and SPENCER and PARKS, JJ.
This is an action commenced by the plan committee and the corporate trustee of a qualified employee benefit plan, seeking court instructions for the distribution of trust funds upon termination of the plan incident to the dissolution of the corporate employer.
On March 27, 1961, Sam P. Wallingford, Inc., adopted a pension plan, effective that date, for the benefit of its employees. Eligibility was extended to every full-time non-union employee who had been in the service of the company for one year or longer. The plan was funded entirely by contributions from the company to the trustee designated in a separate trust instrument.
On February 6, 1974, the board of directors of the company adopted a plan of liquidation which was approved by the stockholders on February 26, 1974. Thereafter, a sale of the operating assets of the company was negotiated resulting in an agreement entered into under date of April 30, 1974. The closing date specified in that agreement was May 1, 1974, and all company employees were terminated as of that date. The fiscal year of the company ended March 31, 1974.
By the terms of the plan, the company-employer agreed to make an annual contribution to the trustee of an amount determined each year by the board of directors within upper and lower limits as certified by the plan actuary. Such a contribution was made each year over the life of the plan although there was evidence that the provisions to ascertain the amount of the contribution each year were not strictly adhered to. However, for at least the years 1971, 1972, and 1973, the company had made an annual contribution of $35,148. During fiscal year 1973-1974, the company had accumulated one-twelfth of that amount each month in anticipation of a contribution to be made as of March 31, 1974.
On March 28, 1974, plaintiff Ralph Moore, as president of the company, directed transfer of the sum of $35,148 to the trustee. He stated that he did so pursuant to his efforts to get everything wound up as much as possible by March 31 and, since that item was on the statement for the company, he assumed it was to be paid as it had been the year before. Although Moore was a member of the board of directors, the board had not expressly authorized the contribution for that year.
In August, 1974, Moore was told by the company attorney, who was neither an officer nor a director, that the contribution should not have been made. Sometime thereafter, Moore talked to the trustee concerning the matter and in April, 1975, the funds so contributed were returned to the company by the trustee in response to a written request from the company.
There is no evidence that the plan was ever terminated by formal resolution pursuant to its terms, nor that the plan terminated for failure to make a necessary contribution. § 8.5(b) provides that, in the event of the sale or dissolution of the company without continuation of the plan, it shall be mandatory for the board of directors and the plan committee to terminate the plan as provided by § 8.3. That section provides that, in the event of termination, the plan committee, as of the first March 31 accounting date thereafter, shall instruct the trustee that the trust fund held by the trustee shall be gradually liquidated "to pay benefits as provided under the Pension Plan, with priorities as follows:
This action was commenced October 25, 1974. All participants, past participants, pensioners, and beneficiaries of the plan were made parties defendant. Several answered, but only defendants L. J. Holgerson and Pete Alford are appellees.
On July 23, 1975, while the present action was still pending, the plan committee issued its final instructions to the trustee for distribution of the pension funds. In accordance with § 8.3 of the plan, each participant was placed in one of the three priority groups and individual entitlements were determined. On July 29, 1975, plaintiffs filed a motion for approval of such final instructions. On September 19, 1975, the trial court entered its order of approval. On that same day, Holgerson filed a motion to set aside the order of approval, which was subsequently joined by Alford. Apparently they are the only two defendants to take exception to the proposed final instructions. On September 26, 1975, the trial court set aside its order of approval as to Holgerson and, on October 21, 1975, as to Alford.
Holgerson had been a long-time employee of the company and became a participant under the plan on the date it became effective. In 1968 he became company president but was removed from that office and his employment was terminated on July 31, 1973. At the time his employment was terminated, Holgerson was fifty-six years of age and had thirty-eight years of continuous service with the company. As such, he was eligible under § 11.3 to apply for early retirement. § 11.8(c) of the plan provides:
". . . (A)ny Participant whose employment was so severed after such Participant was eligible to apply for Early Retirement shall be entitled to payment under the provisions of paragraph 11.8(b) hereof, of a severance benefit in an amount which is the actuarial equivalent of the Early Retirement Pension . . . ."
§ 11.8(b) provides that the severance benefit be held by the trustee until "the third March 31 date subsequent to severance" and at that time be paid over to the severed participant in one lump sum. Thus, Holgerson's lump sum severance benefit was payable on March 31, 1976, a date after termination of the plan on April 30, 1974. The proposed instructions of the plan committee did not provide for Holgerson's lump sum severance benefit. Instead, Holgerson was placed in priority group two, i. e., those "eligible for early retirement." As such, he was assigned a monthly benefit for life provided that all benefits for those in priority group one had been paid and provided further that, if funds were insufficient to pay the assigned benefit to all those in priority group two, the benefit to each of that group would be reduced proportionately.
Alford had also been placed in priority group two but prior to trial he settled with plaintiffs and was placed in priority group one. The only issue on appeal involving Alford is the allowance of $3,500 for his attorney's fee.
By pre-trial order, the...
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