Rosploch v. Alumatic Corp. of America

• Decision Date: 29 March 1977
• Docket Number: No. 75-370,75-370
• Citation: 251 N.W.2d 838,77 Wis.2d 76
• Parties: Eugene ROSPLOCH, Respondent, v. ALUMATIC CORPORATION OF AMERICA, a Foreign Corporation, Appellant.
• Court: Wisconsin Supreme Court

Page 838

251 N.W.2d 838

77 Wis.2d 76

Eugene ROSPLOCH, Respondent, v. ALUMATIC CORPORATION OF AMERICA, a Foreign Corporation, Appellant.

No. 75-370.

Supreme Court of Wisconsin.

Argued March 1, 1977.

Decided March 29, 1977.

Sherwin C. Peltin, Milwaukee (argued), for appellant; Peregrine, Marcuvitz, Cameron, Peltin, Hersh & Lensky, S. C., Milwaukee, on the brief.

Stan L. Lenchek, Milwaukee, for respondent.

ABRAHAMSON, Justice.

This is an action by an employee to recover his interest in a profit-sharing plan. At issue is whether an amendment to such a plan providing for forfeiture in the event the employee took employment with a competitor could be applied by the employer to divest interests which were vested before the amendment took effect.

The facts are not in dispute.

The Alumatic Corporation of America (hereinafter referred to as Alumatic) is engaged in the manufacture and sale of aluminum combination windows and doors. Eugene Rosploch was an employee of Alumatic (or its predecessors) from September of 1946 until October 25, 1973, when he voluntarily terminated his employment following a dispute with the president of the company concerning a matter unrelated to this case. Approximately one week later he took a job with Consolidated Aluminum Corporation, a New Berlin, Wisconsin, firm also manufacturing and selling aluminum combination windows and doors.

While at Alumatic, Rosploch had been a participant in a profit-sharing plan instituted by the company effective January 1, 1968, for the benefit of all full-time salaried non-union employees. Under the plan, which was qualified by the Internal Revenue Service for tax purposes, Alumatic annually would contribute a portion of its net profits to a trust established for this purpose. The company's payments to the trust were apportioned among participating employees as of December 31st of each year according to a point formula based on annual compensation and years of service. The annual share of each employee was then added to his Company Contribution Account. The plan provided that an employee's interest in his Company Contribution Account vested immediately upon retirement, death or permanent total disability. Otherwise the employee's interest vested according to a specified time schedule, beginning with 10 percent vesting after two years' service with the company or its predecessors, and culminating with complete vesting after eleven years of such service. The rights of a participant upon termination (other than by retirement, death or disability) were stated as follows "Except as otherwise provided in the other paragraphs of this Article V, if any employee shall resign or be discharged by the Company prior to reaching age 60 such employee shall be entitled only to the vested equity in his accounts as of the last valuation date preceding the time of such resignation or discharge. 'Vested equity' shall mean the full amount of his interest in his Participant Contribution Account plus the percentage of his interest in his Company Contribution Account which has vested under the terms of (the vesting schedule referred to above)."

The plan also contained a provision entitled "Divesting" which provided that "Notwithstanding anything in this plan to the contrary, the Participant shall forfeit the entire amount credited to his Company Contribution Account" upon the happening of certain specified events. Under the plan as effective January 1, 1968, the events resulting in forfeiture were discharge of the participant by the company for theft, embezzlement, obtaining money or property by false pretenses, insubordination, assisting a competitor without permission, revealing trade secrets of the company, or interfering with the company's relationship with a customer. However, on February 8, 1973, approximately eight months before Rosploch left Alumatic, the plan was amended by adding as an additional ground for forfeiture the following:

"If, during the two years following termination of his employment, the participant shall, without the written consent of Company, enter the employ of, represent, act as a consultant for, or otherwise directly or indirectly perform services for any individual or business organization engaged in activities competitive with those of the Company."

The provision reserving the right to amend the plan provided in pertinent part as follows:

"The Company reserves the right to amend or terminate the Plan at any time; provided, however, that no amendment or termination shall deprive any Participant of his vested equity nor revest in the Company any assets of the Trust . . .."

Following Rosploch's resignation from Alumatic he made demand upon the company for $3,059.73, the balance in his Company Contribution Account as of December 31, 1972, the last valuation date preceding his departure. Alumatic refused to pay, and Rosploch commenced the instant action on May 20, 1974. Alumatic's only defense was that under the "no competition" amendment to the plan, of which Rosploch was well aware, Rosploch was divested of all interest in his Company Contribution Account as a result of his taking employment with Consolidated Aluminum Corporation. The trial court expressed considerable doubt as to the validity of the amendment, but declined to rest its decision on this basis, holding instead that inasmuch as Rosploch's interest in the plan was fully vested at the time the amendment was adopted, the amendment could not be applied. From a judgment entered accordingly Alumatic has taken this appeal.

I. VALIDITY OF THE AMENDMENT

Rosploch has not challenged the general validity of the no-competition amendment to Alumatic's plan, either in the trial court or on appeal, and as a result a record regarding this issue was not made. Therefore we, like the trial court, do not rest our decision on this basis. However, it is settled in this state that non-competition forfeiture clauses in pension or profit-sharing plans are contracts in restraint of trade, and as such, are subject to sec. 103.465, Stats. ¹ We share the trial court's view that the validity of the amendment to Alumatic's plan is questionable on this ground.

II. APPLICATION OF THE AMENDMENT

Assuming for purposes of decision that the no-competition amendment was valid, we reach the dispositive issue in this case. There was no evidence that would have justified divestment of Rosploch's interest under any of the causes of forfeiture in the plan before it was amended on February 8, 1973. It is also undisputed that Rosploch had been employed by Alumatic or its predecessors for more than eleven years before the profit-sharing plan was instituted; that he therefore acquired a 100 percent vested interest in each annual contribution to his Company Contribution Account at the time the contribution was made; and that as of December 31, 1972, Rosploch had in his account the sum of $3,059.73. But for the amendment in question, when Rosploch resigned in October of 1973, he would have been entitled to payment of that sum, "the vested equity in his accounts as of the last valuation date preceding the time of (his) resignation . . .," according to one of the alternative modes of payment specified in the plan. The issue is whether the trial court correctly concluded that under the circumstances the amendment could not change this result.

The profit-sharing plan herein was in essence a contract between the employer and the employee. Holsen v. Marshall & Ilsley Bank, 52 Wis.2d 281, 284, 190 N.W.2d 189 (1971). The general rule as to construction of contracts, which applies with equal force here, is that the meaning of particular provisions in the contract is to be ascertained with reference to the contract as a whole. RTE Corp. v. Maryland Casualty Co., 74 Wis.2d 614, 620, 247 N.W.2d 171 (1976). This court has applied the rule that profit-sharing plans are to be liberally construed in favor of the employee, and that conditions precedent are not favored in contracts of this nature. Holsen v. Marshall & Ilsley Bank, supra at p. 286, 190 N.W.2d 189; Voigt v. South Side Laundry & Dry Cleaners, Inc., 24 Wis.2d 114, 116-118, 128 N.W.2d 411 (1964). ²

The plan reserves to Alumatic the right to amend the plan at any time, but qualifies this right as follows:

"(N)o amendment . . . shall deprive any Participant of his vested equity . . . ."

The term "vested equity" is defined in the plan to mean

"the full amount of his interest in his Participant Contribution Account plus the percentage of his interest in his Company Contribution Account which has vested under the terms of Article V, sub-paragraph A,2."

These two provisions plainly state that vested interests are protected from impairment by subsequent amendment. But Alumatic, seizing on a phrase from this court's decision in Zimmermann v. Brennan, 56 Wis.2d 623, 202 N.W.2d 923 (1973), argues that it was not the amendment which resulted in the loss of Rosploch's vested equity, but his own act of accepting employment with a competitor, done with knowledge of the nature of the amendment. Though the substance of Zimmermann has little relevance to the instant case, ³ Alumatic's contention has a certain surface plausibility. It overlooks the nature of the contract here in question, however. The plan constituted an offer of deferred additional compensation, to be paid according to its terms, which Rosploch accepted by continuing to work for Alumatic. Zwolanek v. Baker, 150 Wis. 517, 137 N.W. 769 (1912). By virtue of the provision for amendment or termination the offer could have been modified or revoked at any time. However, Rosploch had already "accepted" the offer and become contractually entitled to the benefits he here seeks by virtue of his working for Alumatic through December 31, 1972. It is not contended that his performance was less than that called for by the plan as it then existed. His contractual right to benefits was of course subject to divestment upon the...