Occidental Life Ins. Co. of Cal. v. Blume

• Decision Date: 11 February 1965
• Docket Number: No. 37384,37384
• Citation: 399 P.2d 76,65 Wn.2d 643
• Parties: OCCIDENTAL LIFE INSURANCE COMPANY OF CALIFORNIA, a corporation, Respondent, v. John E. BLUME et al., as Trustees of the Washington Teamsters Welfare Trust, Appellants, Nugent LaPoma et al., as Trustees of the Puget Sound and Inland Empire Teamsters Health and Welfare Plan, and as representatives of the employers and local unions supporting said trust and the employees covered thereby, Defendants, Local 174, I.B.T., et al., Union and Individual Employee Intervenors, Star Machinery et al., Employer Intervenors.
• Court: Washington Supreme Court

Page 643

65 Wn.2d 643

399 P.2d 76

OCCIDENTAL LIFE INSURANCE COMPANY OF CALIFORNIA, a corporation, Respondent, v. John E. BLUME et al., as Trustees of the Washington Teamsters Welfare Trust, Appellants Nugent LaPoma et al., as Trustees of the Puget Sound and Inland Empire Teamsters Health and Welfare Plan, and as representatives of the employers and local unions supporting said trust and the employees covered thereby, Defendants Local 174, I.B.T., et al., Union and Individual Employee Intervenors Star Machinery et al., Employer Intervenors.

No. 37384.

Supreme Court of Washington, Department 1.

Feb. 11, 1965.

Preston, Thorgrimson, Horowitz, Starin & Ellis, Seattle, for appellants.

MacDonald, Hoague & Bayless and Grosscup, Ambler, Miller & Lawrence, Seattle, for respondent.

HUNTER, Judge.

This appeal involves conflicting claims to an insurance refund paid into court by the plaintiff in interpleader, Occidental Life Insurance Company of California (hereafter referred to as Occidental).

Claimants are the trustees of Washington Teamsters Welfare Trust (hereafter referred to as Washington Trust, and Washington Trustees) and trustees of Puget Sound and Inland Empire Teamsters Health and Welfare Plan (hereafter referred to as Puget Trust, and Puget Trustees). The two groups made conflicting claims to a $163,513 experience rating refund Occidental had determined and was prepared to pay Washington Trustees, in accord with the terms of Washington Trust's group policy with Occidental. Puget Trustees demanded approximately one-third of the refund as their 'pro rata share.' The Washington Trustees then claimed the entire refund. In August, 1960, Occidental interpleaded the two claimants as defendants and paid the refund into court in order to determine the relative rights of the parties to the fund.

To see, clearly, the relationship between the two rival trusts requires a brief sketch of their background. In early 1958, there existed 15 small health-and-welfare trusts established by the employers and local unions affiliated with the Western Conference of Teamsters. The purpose of each was to provide health-and-welfare benefits for employees and their dependents. Each employer contributed a fixed amount per employee each month to one of the 15 trusts in accord with the collective bargaining agreement to which the employer was a party.

On April 29, 1958, the 15 small trusts were consolidated into the Washington Trust for economy reasons. The Washington Trust's board of trustees comprised equal numbers of representatives of labor and management, as had the governing boards of each of the smaller trusts. The Washington Trustees cancelled the life insurance policies that had been issued to the 15 small trusts, all of which were with plaintiff Occidental, and in their place received the group policy here in question. It was effective six months, July 1, 1958, to December 31, 1958, and covered all the beneficiaries under the Washington Trust. The Washington Trustees were the named policy holders. The policy provided for an experience rating refund to be distributed to the holder to the extent, if any, that the premiums exceeded the aggregate of claims and costs. The Washington Trust instrument included an express provision that in the event such a refund were paid that it should be disbursed pursuant to the terms of the trust in the trustees' discretion.

There were some 30,000 employee beneficiaries of Washington Trust during the period covered by the policy in question. In November of 1958, some 9,500 of that number, and their representative employers, led by local unions which opposed those in control of Washington Trust, voluntarily withdrew from Washington Trust and formed a new health-and-welfare trust, Puget Trust. However, the employers of the 9,500 who withdrew from Washington Trust continued to pay in the required contributions to Washington Trust through December 31, 1958, the end of the Occidental policy period. On January 1, 1959, payments into Puget Trust began under new collective bargaining agreements entered into between 'locals' representing the 9,500 employees who withdrew from Washington Trust and their employers. Washington Trust took out a group policy with another company, and, effective January 1, 1959, its beneficiaries no longer were covered by an Occidental policy. Both trusts continue in existence today.

After both claimants had served and filed their answers to Occidental's complaint in interpleader, the Washington Trustees moved for summary judgment in their behalf on grounds that: (1) under the policy terms the money was payable to them; and (2) under the terms of the trust, to which the employees who withdrew had been parties, it had been agreed that the Washington Trustees should disburse the funds pursuant to the terms of the trust, and therefore, the employees who withdrew had no right or power to interfere since they were subject to the terms and conditions of the Washington Trust agreement during the time the refund was earned.

The unions and employers representing the employees who withdrew from the Washington Trust, and the employees themselves, intervened. The basis of the claim of the employee intervenors was that they were entitled to their pro rata share of the experience rating refund, since it was earned during a period in which they were beneficiaries of the Washington Trust, even though it was not paid until after they had voluntarily withdrawn. It was not until July 19, 1959, that Occidental determined to make the refund and was prepared to pay it.

The trial court granted summary judgment in which it directed that the remaining funds on deposit (the parties having previously stipulated that $100,000 should be released to the Washington Trustees) should also be distributed to the Washington Trustees. As part of that judgment, it impressed the entire $163,513, and issues and profits therefrom, with a trust which required the Washington Trustees to use it for the benefit of all those who were beneficiaries of the Washington Trust during the six-month policy period in which the refund was earned, including employee intervenors. This, in effect, constituted summary judgment for the employee intervenors.

The trial court also discharged plaintiff Occidental from liability, dismissed the claim of Puget Trustees and impressed the employee intervenors' 'share' of the funds which went to Washington Trustees with a lien for attorney fees due the attorneys for employee intervenors. The amount of such attorney fees was to be fixed by the court after the Washington Trustees determined the amount of benefits due and method of conferring such benefits on employee intervenors.

The Washington Trustees appeal. No appeal was taken by the Puget Trustees from the dismissal of their claim.

Appellant trustees contend the trial court erred in impressing the trust and thereby substituting its judgment for theirs, when discretion had been vested in them by the trust agreement.

There was no provision in the Washington Trust agreement expressly giving the trustees discretion to determine the effect of employee intervenors' voluntary withdrawal from the trust on their right to share in a subsequently paid experience rating refund. But that such power was vested in them by the trust instrument may be implied, both from the specific powers conferred upon the trustees in relation to the experience rating refund, and the broad powers otherwise conferred upon them, in the trust instrument. Monroe v. Winn, 16 Wash.2d 497, 508, 133 P.2d 952 (1943); Old Nat. Bank & Union Trust Co. of Spokane v. Hughes, 16 Wash.2d 584, 134 P.2d 63 (1943); 54 Am.Jur., Trusts § 289.

The Washington Trust instrument provided that experience rating refunds were to be used '* * * for the general purposes of this trust As the Trustees in their discretion shall determine.' (Italics ours.) Art. III, § 4(3). Other powers conferred upon the Washington Trustees in the trust instrument included power of amendment, power to construe the provisions of the trust and, in Art. V, § 1(f), to 'Do all acts whether or not expressly authorized herein which the Trustees may deem necessary or proper for the protection of the Trust Fund * * *.' Art. VIII, § 5 provided: 'Any questions arising in connection with the performance of the provisions of this Washington Teamsters Welfare Trust not hereto specifically provided for shall be left to the sole discretion of the Trustees.' We are satisfied the Washington Trustees had the implied power under the trust agreement to exercise their discretion in regard to the effect of the employee intervenors' withdrawal on their right to share in the refund.

Though there was no direct evidence that the Washington Trustees had exercised their discretion by formal resolution in accord with the trust agreement, the record shows that they had determined to exclude the employee intervenors from any...