Schofield v. Zion's Co-Op. Mercantile Institution

• Decision Date: 14 December 1934
• Docket Number: 5463
• Citation: 39 P.2d 342,85 Utah 281
• Parties: SCHOFIELD v. ZION'S CO-OP. MERCANTILE INSTITUTION. TINGEY v. Z. C. M. I
• Court: Utah Supreme Court

39 P.2d 342

85 Utah 281

SCHOFIELD v. ZION'S CO-OP. MERCANTILE INSTITUTION.

TINGEY v. Z. C. M. I

No. 5463

Supreme Court of Utah

December 14, 1934

Appeal from District Court, Third District, Salt Lake County; J. W McKinney, Judge.

Actions by Nephi Y. Schofield and Franklin S. Tingey against the Zion's Co-operative Mercantile Institution. From a judgment for plaintiffs, defendant appeals.

AFFIRMED.

Bagley Judd & Ray, of Salt Lake City, for appellant.

Willard Hanson, of Salt Lake City, for respondents.

LARSON District Judge. STRAUP, C. J., and ELIAS HANSEN, FOLLAND, and EPHRAIM HANSON, JJ., concur. MOFFAT, J., being disqualified, did not participate.

OPINION

LARSON, District Judge.

This is an appeal from a judgment entered in the district court of Salt Lake county in favor of the plaintiffs and against the defendant, for money alleged to be due plaintiffs from defendant under a pension system established by the defendant in its institution some years ago. The two cases involve substantially the same facts, and therefore under stipulation of counsel were tried together and are now here on appeal on one record under the same stipulation.

The defendant corporation, by resolution of its board of directors, September 21, 1911, established the system in question "for the purpose of promoting the welfare of the officers and employees of this institution, and to encourage long and faithful service." The terms and conditions of the pension system were distributed to all the employees in a printed folder. It contains sixteen paragraphs. Those essential to the decision of the present cases are as follows:

"For the purpose of promoting the welfare of the officers and employees of this institution, and to encourage long and faithful service, the Board of Directors hereby established the following Pension System:

"1. The administration of the Pension System shall be the Executive Committee and General Manager, to be known as the Board of Pensions. This Board shall have power to make and enforce rules and regulations for the efficient operation of the department. It shall also determine the eligibility of employees to receive pension allowances; to fix the amount of such allowances, and to prescribe the conditions under which such allowances may inure. The action of the Board of Pensions shall be final and conclusive.

"2. The benefits of the Pension System shall apply only to those persons who have been required to give their entire time to the Institution.

"3. All officers and employees who have attained the age of 65 years and have served the Institution honorably for twenty years shall be entitled to retire with pension.

"4. Any employee may be retired with pension before the age limit by order of the Board of Pensions. * * *

"6. The amount of pension to which an employee is entitled at 65 shall be the amount paid him when he actually does retire. * * *

"12. The rate of pension is to be based on salary and length of service as follows: A monthly pension of one per cent of the average monthly salary, as shown by the payroll for the last ten years, multiplied by years of service. * * *

"15. Neither the action of the Board of Directors in establishing a System of Pensions, nor any other action now or hereafter taken by them or the Board of Pensions in the inauguration and operation of a pension department shall be construed as giving to any officer or employee of the institution a right to be retained in its service, or any right or claim to any pension allowance; and the Institution expressly reserves its right and privilege to discharge at any time any officer or employee when the interest of the Institution in its judgment may so require, without liability for any claim for pension or other allowance than wages due and unpaid.

"16. The Board of Directors reserves the right to change or amend any of the foregoing rules and regulations at any time, and to change the basis of pension allowances by increasing or reducing the same, whenever, in its judgment, the welfare of the Institution may require such change; and the decision of said Board of Directors, in establishing such new basis shall be absolutely conclusive."

On January 1, 1929, the plaintiff Nephi Y. Schofield retired from service and was allowed a pension under the system in the sum of $ 126.75 a month. He was credit manager of the defendant at the time of his retirement. On January 1, 1930, the plaintiff Franklin S. Tingey retired from service and was allowed a pension under the system in the sum of $ 186.75 a month. He was store superintendent of the defendant at the time he retired, and had served as assistant manager and as a member of the executive committee. Employees contributed nothing for the purpose of paying these pensions, and no pension fund was created. The defendant paid the pension allowance out of its income. The original pension allowances were paid monthly to pensioners of the defendant to and inclusive of the month of June, 1932.

Under date of August 24, 1932, the board of directors of the defendant, by resolution, revised the pension allowances effective as of July 1, 1932. The plaintiffs were offered, but refused to accept, the revised pension allowances fixed for them, namely, $ 65 a month for Mr. Schofield and $ 75 for Mr. Tingey, and instituted their respective actions to enforce the payment of the original allowances.

Numerous errors are assigned by appellant as to the admission and rejection of evidence by the trial court, but the principal question presented involves the construction and interpretation of the pension system. Plaintiffs contend that the pension system constituted, from the time of their retirement, a binding contract to pay them the allowed pension for life. Defendant, on the other hand, contends that the pension system was a mere gratuity from the defendant, terminable at the will or judgment of the defendant corporation.

Did the pension system constitute a binding contract between defendant corporation and the pensioners which gave them a vested right to the amount of pension as originally fixed and leave no authority in the board of directors of the defendant corporation to in any way, for any cause, modify or change the amount of the pension? What were the rights and liabilities of the parties created by the pension system of 1911 and not modified as far as material here, until after the retirement of the plaintiffs and the fixing of their pension allowances?

Appellant vigorously asserts that the pension system, as set forth in the printed folder, is clear and certain and needs no extraneous evidence to explain or interpret it, and with this contention we are inclined to agree. The pension system, as set forth in the printed folder, states its purpose, "to promote the welfare of the employees and to encourage long and faithful service"; it identifies the parties, the defendant corporation on the one hand, and, on the other, "employees who have attained the age of 65 years and served the company faithfully and satisfactorily for 20 years" (consecutive, except by special permission); it provides for compulsory retirement of the employee from service and limits his future activities elsewhere; it fixes the amount of allowance based upon years of service and salary, but no years of service over 65 years of age can be included. There is nothing indefinite about that; it has competent parties, a valid consideration, a lawful purpose, and is not against public policy.

Appellant takes the position that the pension system constituted, not a contractual relationship, but a mere offer by the company of a gratuity to its employees, in which the employee could obtain no vested right; that the pension system does not constitute an offer which is subject to acceptance by the employee so as to create a contract. It may be conceded that the system is not such an offer as may be made into a binding contract by merely verbal acceptance, nor by the act of the party in entering the services of the institution. Therefore, argues the appellant, it is like a pension given by the government as a gratuity. Case here is clearly distinguishable from government pensions. There, the pension is set up after service performed, in appreciation for the work done or service rendered. Here the promise of a pension is made in advance of work to "encourage long and faithful service." Should the government say that to all persons who shall enlist in the army and serve the full period of enlistment, with no demerit mark on his service record, a bonus of $ 500 would be given upon his retirement, would any one say that it constituted a mere gratuity like a pension bill passed by Congress for the veterans of past wars? Could one offering a reward for the capture of a culprit, after the capture had been made, contend that his offer was not subject to such an acceptance as would constitute an obligation on his part to pay the reward? Until the acceptor has completed the act called for in the offer, it usually may be withdrawn, limited, or modified. The offer in such cases constitutes a promise for a completed act, and once the act is completed by the acceptor the offer cannot be modified or withdrawn. It becomes a binding contract. Such is the case in actions brought to recover bonuses offered to employees in consideration of their remaining in the service of the employer for a stipulated period of time or for doing a stipulated amount of business for the employer. Once the conditions of the employment and bonus offer have been fulfilled, they are uniformly held to be binding.

In the pension system here involved, the company said to its employees: Any one who shall serve me faithfully for 20 years and attain the age of 65 years...