Murphy v. R. J. Reynolds Tobacco Co.

• Decision Date: 07 February 1967
• Docket Number: No. 52299,52299
• Citation: 148 N.W.2d 400,260 Iowa 422
• Parties: Miles R. MURPHY, Appellant, Cross-Appellee, v. R. J. REYNOLDS TOBACCO COMPANY, Appellee, Cross-Appellant.
• Court: Iowa Supreme Court

Page 400

148 N.W.2d 400

260 Iowa 422

Miles R. MURPHY, Appellant, Cross-Appellee, v. R. J. REYNOLDS TOBACCO COMPANY, Appellee, Cross-Appellant.

No. 52299.

Supreme Court of Iowa.

Feb. 7, 1967.

Rehearing Denied April 4, 1967.

David J. Dutton, Mosier, Mosier, Thomas & Beatty, Waterloo, for appellant, cross-appellee.

T. M. Ingersoll and Harry E. Wilmarth, Cedar Rapids, for appellee, cross-appellant.

MASON, Justice.

Miles R. Murphy, a former employee of R. J. Reynolds Tobacco Company, brought this law action against it seeking declaratory judgment establishing his rights to disability benefits under an employees' retirement plan created by the company.

Plaintiff alleges in Division I of his petition the creation of the plan, setting forth its terms and provisions; his completion of more than the necessary credited 15 years of service as defendant's salesman; his total incapacity within the meaning of the disability retirement portion of defendant's plan; his application, while still defendant's employee, for disability benefits and the denial thereof.

Defendant's motion to dismiss this division asserts plaintiff failed to state a claim upon which relief can be granted against Reynolds, rule 104(b), Rules of Civil Procedure; the court does not have indispensable parties before it and plaintiff's rights, if any, must be asserted against the trustees and the retirement board provided by the plan and not against defendant.

The court sustained defendant's motion, ruled the retirement board, established to administer the employees' retirement plan is an indispensable party to the action under rule 25, R.C.P.; in the event plaintiff is unable to acquire jurisdiction of the members of the board, it would dismiss plaintiff's action.

Defendant's motion to make Division II of plaintiff's petition more specific was also sustained, but that matter is not now before us.

Plaintiff's application to this court for permission to take interlocutory appeal was granted. Rule 332, R.C.P. Defendant cross-appealed from the trial court's failure to dismiss the suit as to defendant Reynolds.

I. The question presented is whether the court erred as a matter of law in ruling that members of the retirement board of the employees' retirement plan are indispensable parties and that unless plaintiff can obtain jurisdiction of these members, his petition will be dismissed.

To answer this question we must determine whether an employee who claims as a beneficiary under a pension plan containing terms and provisions similar to the one here must bring his suit against the retirement board.

Defendant contends the employee must and it necessarily follows the retirement board is an indispensable party since it represents all participants in the fund and its decision is under attack.

II. In January 1946 Reynolds, a New Jersey corporation with headquarters in North Carolina, voluntarily created an employees' retirement plan. The administration and responsibility for carrying out the plan were placed in the hands of the retirement board consisting of five persons appointed by the company's directors to serve at their pleasure without compensation. The board elects a chairman and secretary who may, but need not be, members of the retirement board, and is obliged to make rules for the administration of the plan and for the transaction of its business. It may appoint committees, employ counsel, agents and such clerical, accounting and actuarial service as needed to carry out the plan.

All contributions to provide the benefits under the plan are made by the company, none by the employees; all contributions are irrevocable and transferred to a trustee under the plan to be used in accordance with the provisions thereof; all assets of the plan are transferred to a trustee to be used only for satisfaction of liability for benefits.

Employees' qualifications for benefits are determined by the retirement board. Qualified employees are limited to the retirement benefits determined by the formula specified in the plan, which excludes any promise or obligation of the company to pay benefits to its employees. In the event of termination of the plan each participant is entitled only to his proportionate share of the assets held in trust.

An employee who serves the company for a certain time may make application and if found by the retirement board to be totally and permanently incapacitated, mentally or physically, from the further performance of his duties, shall be retired and receive a retirement income allowance. Before an employee can receive this disability pension, a physician designated by the board must certify the employee is in fact within the limits of disability stated.

The rule-making power of the retirement board is subject at all times to the plan's limitations as well as any restrictions, requirements or modifications the directors may from time to time impose. The retirement board also determines all questions arising out of or in connection with the plan which are not required to be resolved by the directors.

When the retirement board, acting within the limitations of the plan and the directors' restrictions, requirements and modifications, determines a question in connection with the plan, such determination is deemed conclusive and binding on all persons having an interest in the plan.

Simultaneously with the creation of the plan a trust agreement was executed between Reynolds and Mellon National Bank and Trust Company providing that the bank would act as trustee of 'such sums of money and such property acceptable to the trustee as shall from time to time be paid and delivered to the trustee and the earnings and profits thereon.' The trustee agreed to hold the trust funds solely 'for the exclusive benefit of participants, retired participants and contingent annuitants under the plan and paying the expenses of the plan.' The trust agreement further provides the trustee is to pay money to participants only on the order of the retirement board. The trustee is appointed and removed by the directors.

III. Defendant's motion to dismiss and its argument in support of the court's ruling are based, at least in part, on section 8, subsection 7 of the retirement plan which provides:

'The Company shall have no liability for the payment of the benefits under the Plan, nor shall the Company have any liability for the administration of the Plan or of the funds or assets paid over to the Trustee or Trustees, and each participant, retired participant and contingent annuitant shall look solely to the assets of the Plan for any payments or benefits under the Plan.'

Defendant argues that under this section of the plan an irrevocable trust fund was created and such right as plaintiff may have is not by way of breach of contract suit against defendant on an alleged contract that does not exist, but is as a beneficiary of the trust to which he shall look for any payments or benefits; therefore, his remedy is an action in equity against the trustee.

Plaintiff contends he is seeking a determination of his rights to benefits under the employees' retirement plan, asserting he has fulfilled all requirements of the pension plan which entitle him to a share of the pension trust; he is not asking that the company pay benefits instead of resorting to the trust fund; the retirement board created by the company under its retirement plan is a mere agent of the corporation subject to the direction and control of the directors. To support this contention plaintiff directs attention to section 6, subsection 7, which provides:

'The Retirement Board, subject to the limitations of the Plan and to such restrictions, requirements or modifications as the Board of Directors may from time to time adopt or impose, shall from time to time establish rules for the administration of the Plan and the transaction of its business and shall make determination of all questions arising out of or in connection with the provisions of the Plan not herein required to be determined by the Board of Directors, and any such determination shall be conclusive and binding upon all persons having an interest in or under the Plan.'

He asserts by reason of this section all decisions of the retirement board, like its rule-making powers, are subject to the restrictions, requirements or modifications as the directors from time to time adopt or impose; if the board determines participants claiming disability retirement allowance are not entitled to it pursuant to section 4(3)(a), the directors could overrule the decision and require the board to modify or reverse itself; this retained control indicates the retirement board lacks any independent or final authority.

Plaintiff further asserts the requirement that the board prepare and file with the directors an annual report showing the assets and liabilities of the plan as well as the operation thereof, clearly demonstrates that the directors see themselves as ultimately responsible for the...