Patti v. Western Mach. Co.
| Decision Date | 04 May 1976 |
| Docket Number | No. 642,642 |
| Citation | 241 N.W.2d 158,72 Wis.2d 348 |
| Parties | Lawrence A. PATTI, Appellant, v. WESTERN MACHINE COMPANY, a Wisconsin Corporation, Respondent. (1974). |
| Court | Wisconsin Supreme Court |
John W. Emmerling and Edward D. Styles, Milwaukee, on briefs, for appellant.
William H. Alverson, Morris Karon and Godfrey & Kahn, S.C., Milwaukee, on brief, for respondent.
This controversy involves a lawsuit by the plaintiff-appellant, Lawrence A. Patti, to recover deferred compensation from the defendant-respondent, Western Machine Company.
Patti began working for the Western Machine Company in 1939 as a packer in the shipping department. He gradually rose through the ranks to become a vice-president in 1945 and a member of the board of directors in 1950. His responsibility was plant operations.
In 1968 an insurance agent presented to Denial Maddigan, the president of the company, a proposal for a deferred compensation plan which was to be funded through the purchase of life insurance policies on the lives of key executives. At its annual meeting on April 1, 1969, the board approved a deferred compensation agreement for Maddigan. At this meeting Patti inquired as to the feasibility of similar agreements with other key officers of the company, and Maddigan was authorized to discuss such agreements with corporate counsel. The company purchased an insurance policy on Patti's life on May 16, 1969. All of the key executives, including Patti, discussed the details of the plan in informal sessions throughout 1969.
On September 26, 1969, the board authorized deferred compensation agreements for Patti and other key executives. The agreement with Patti was predated to January 1, 1969. It provided in relevant part as follows:
Patti submitted a letter of termination to Maddigan on April 7, 1970, listing health reasons as his motivating factor. He requested the board 'to seriously and thoughtfully consider me eligible for deferred compensation.'
The request was denied and, after repeated attempts to collect payments under the deferred compensation agreement, Patti sued Western Machine, claiming that he had retired and was entitled to such payments under the agreement. After a trial to the court, the trial court disagreed and judgment was entered dismissing Patti's complaint.
On this appeal, the first issue is whether the word 'retirement,' as used in the deferred compensation agreement between the parties, is ambiguous on its face so that the trial court was justified in resorting to extrinsic evidence in order to ascertain the intent of the parties. We conclude that the word 'retirement' was ambiguous as used in the agreement, and that the trial court properly considered extrinsic evidence, in order to ascertain the true intent of the parties to the agreement.
The ultimate aim of all contract interpretation is to ascertain the intent of the parties. If this intent can be determined with reasonable certainty from the face of the contract itself, there is no need to resort to extrinsic evidence. 1 If, however, the language of the contract is ambiguous, then the court is not restricted to the face of the instrument in ascertaining intent, but may consider extrinsic evidence. 2 Words or phrases in a contract are ambiguous when they are reasonably susceptible of more than one meaning. 3
The trial court correctly determined that the word 'retirement' was ambiguous in the deferred compensation agreement between Patti and Western Machine. The agreement states only that Patti is entitled to deferred compensation upon termination of employment by reason of 'death, disability or retirement.' It does not explain or define the meaning of the word retirement in any way. As the trial court noted, the mere use of the word 'retirement' in an employment setting is patently ambiguous because it may mean anything from voluntary, unilateral termination to involuntary, forced termination. Resort to extrinsic evidence is, under these circumstances, the only way to assign to this word the meaning intended by the parties.
Counsel for Patti argues that the meaning of the word 'retirement' is clear and unambiguous because it is defined in the same section it is used. This definition is alleged to exist in the language which provides for a base compensation of $2,000 per year, subject to a $500 increase 'for each full calendar year of Employee's continued employment by Company hereunder, commencing with the year 1969,' and further subject to a decrease of $1,000 'per year for each calendar year or part thereof after November 30, 1981, in which Employee shall not have retired and shall continue to be employed by Company.' In other words, it is contended that, because it is possible to receive payments under the contract as early as 1969, it must also be possible to retire as early as 1969.
This is a misreading of the terms of the contract. The events of 'death, disability or retirement' are clearly established as the conditions precedent to the obligation of the company to pay any deferred compensation at all. The sliding scale, providing for increasing benefits from 1969 until 1981 and decreasing benefits thereafter, merely fixes the terms and amount of payment. This language does not define or explain the content of the word 'retirement,' but stipulates that, once the condition of whatever 'retirement' is has been fulfilled, the company will pay according to the sliding scale. It is entirely possible, as the trial court later determined, that the parties intended that Patti could suffer death or disability as early as 1969, but could not unilaterally retire at that early date, after having just signed the agreement. The rule is that the language of a contract establishing the terms of payment does not create or cancel the language of the contract establishing the obligation of payment. 4 Normally, these two sets of language are in different provisions of the contract, but the fact that they are here in the same provision does not render the rule inapplicable.
The second issue on this appeal is whether the trial court's...
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