Williams v. Poulsbo Rural Telephone Ass'n, 44014

• Citation: 555 P.2d 1173,87 Wn.2d 636
• Decision Date: 04 November 1976
• Docket Number: No. 44014,44014
• Parties: Minnie M. WILLIAMS, Respondent/Cross-Appellant, v. POULSBO RURAL TELEPHONE ASSOCIATION, a Washington Corporation, et al., Appellants.
• Court: United States State Supreme Court of Washington

Page 636

87 Wn.2d 636

555 P.2d 1173

Minnie M. WILLIAMS, Respondent/Cross-Appellant, v. POULSBO RURAL TELEPHONE ASSOCIATION, a Washington Corporation, et al., Appellants.

No. 44014.

Supreme Court of Washington, En Banc.

Nov. 4, 1976.

Perkins, Coie, Stone, Olsen & Williams, Theodore Collins, Ausum, Bassett & Gemson, R. L. Gemson, Frank R. Morrison, Jr., Seattle, for appellants.

Williams, Lanza, Kastner & Gibbs, William D. Cameron, Seattle, for respondent.

HUNTER, Associate Justice.

Until May 7, 1972, when it filed a statement of intent to dissolve, defendant Poulsbo Rural Telephone Association (PRTA) was a Washington corporation operating a telephone utility business. On May 28, 1971, PRTA entered into an agreement with defendant United Telephone Company of the Northwest (Northwest) and Northwest's parent corporation, United Telecommunications, Inc. (United). PRTA agreed to transfer all of its assets to Northwest in exchange for common stock of United. Northwest was to assume all of PRTA's liabilities and obligations. In conjunction with this reorganization, PRTA adopted a plan of liquidation and dissolution in order to wind up its affairs, cease doing business, and distribute to its shareholders the newly acquired United common stock.

Paragraph 12 of the reorganization agreement is entitled 'Employee Benefits' and it relates to the treatment of PRTA employees under the reorganization. Basically, it provides that PRTA employees will be offered continued employment with Northwest after the takeover. It also sets out the employee benefits to which the former PRTA employees will be entitled as Northwest employees, including pension plan seniority credit for years of employment with PRTA. Specifically, Paragraph 12 states:

As employees of a subsidiary of United, the permanent or regular operating personnel of Poulsbo shall be offered positions substantially comparable to those presently held in Poulsbo . . .

As employees of Northwest, all employees, employed by Poulsbo at the time of Closing on a permanent or regular basis will be eligible for and will be offered certain benefits available to employees of United and its other subsidiaries from time to time. These benefits include:

(a) United System Employee Retirement Plan (subsequent to the closing date of this Agreement, Poulsbo's existing Profit Sharing Plan and Trust Agreement dated as of January 1, 1966, as amended, with the Bank of California, N.A. as Trustee, will be amended to continue as the United System Employee Retirement Plan and all such permanent or regular employees of Poulsbo will be given credit for pension purposes for the years of service with Poulsbo);

Plaintiff Minnie M. Williams is one of the PRTA employees who accepted the offer set out in Paragraph 12 and continued to work for Northwest following the take-over.

The United System Employee Retirement Plan (United Plan), to which Paragraph 12 refers, is the retirement pension plan available to employees of United and its participating subsidiaries. The United Plan is administered by a Retirement Benefit Committee, which is appointed by, and serves at the pleasure of, United's board of directors. The United Plan also gives United the right to terminate the plan for any reason at any time. The United Plan funds the United Telephone System Pension Trust (United Trust) and thus provides a trust fund held for the benefit of all employees covered by the United Plan. The United Trust agreement provides that distributions shall be made by the trustees at the direction of the Retirement Benefit Committee and that the trustees shall be under no liability for distributions made pursuant to Committee directions.

The Profit Sharing Plan and Trust Agreement of Poulsbo (Poulsbo Plan), to which Paragraph 12 also refers, was set up to provide certain retirement related benefits to PRTA employees. The Poulsbo Plan became effective on January 1, 1966, and the trustee under the agreement is the defendant Bank of California, N.A. (Bank).

The board of directors of PRTA amended the Poulsbo Plan on December 31, 1971, by adding a new section, § 6.06. The obvious purpose of the amendment was the continuation of the Poulsbo Plan, even though PRTA would no longer be doing business, after the acquisition of PRTA by Northwest. Recital E of the December 31, 1971 amendment makes this purpose clear. ¹

In order to accomplish the continuation of the Poulsbo Plan, § 6.06 provides that the rights of participating employees shall vest upon the closing of the reorganization agreement between United, Northwest and PRTA; that the Poulsbo Plan will continue independently; and that for purposes of the Poulsbo Plan, employment with Northwest will constitute employment with PRTA. ² This amendment was necessary to prevent termination of the Poulsbo Plan due to the reorganization, which resulted in the complete discontinuance of PRTA contributions, the dissolution of PRTA, and the termination of employment with PRTA for all employees. Under §§ 6.03, 6.04, and 5.04 of the Poulsbo Plan, the occurrence of any of these situations would otherwise cause the Plan to terminate. ³

The PRTA board of directors adopted § 6.06 pursuant to their reserved power of amendment contained in § 6.01 of the Poulsbo Plan. Among other limitations, § 6.01 states:

Any such amendment shall become effective upon delivery of a written instrument executed by order of the Board of Directors of the Company, to the Trustee, and the endorsement by the Trustee of its receipt . . .

In the case of § 6.06 the following procedures occurred with regard to its adoption. The PRTA board of directors formally adopted § 6.06 on December 31, 1971. Copies of the amendment had been sent to the trustee Bank on the previous day, December 30, 1971, and these were signed by a Bank trust officer and apparently returned to PRTA. Following adoption of the amendment, a copy of § 6.06 was sent to the trustee Bank on January 3, 1972. The presence of the Bank's routine routing stamp on the accompanying cover letter indicates that at least the letter was received. At a later date, however, the Bank requested a copy of the amendment. Formal approval by the Bank's trust department did not occur until December 20, 1972.

On November 14, 1972, the board of directors of United amended the United Plan as of January 1, 1972, by adding 'Appendix S.' Northwest's board of directors adopted the United Plan as amended by 'Appendix S' on November 21, 1972. Northwest also purported to amend the Poulsbo Plan to continue as the United Plan and authorized and directed the Bank to transfer the assets of the Poulsbo Plan to the United Trust. At the request of United and Northwest, and without direction from PRTA, the Bank then transferred the Poulsbo Plan assets of $202,915.49 to the United Trust on February 12, 1973.

In April, 1973, Plaintiff Williams filed suit both in her individual capacity and as the representative in a class action, representing the class of former PRTA employees who had continued their employment under Northwest. The named defendants were PRTA, Bank, Northwest, and United, but both sides agree that United was never properly served with the summons and complaint and did not appear in the action. The plaintiff sought a declaratory judgment as to her rights under the Poulsbo Plan and the reorganization agreements executed by PRTA, Northwest, and United. She also sought accompanying injunctive relief and a judgment against the Bank for certain administrative fees received from the Poulsbo Plan trust. The suit was never certified as a class action and following plaintiff's motion for summary judgment and defendants' cross-motion for dismissal, the court entered summary judgment on January 13, 1975.

In its summary judgment the trial court in general upheld the validity of § 6.06 and Paragraph 12 of the reorganization agreement, including pension plan seniority credit; thus, for practical purposes, allowing the combination of the Poulsbo Plan and the United Plan. The court, however, placed certain limitations on Appendix S and required that the Poulsbo Plan trust funds be treated as a separate account with interest paid at an annual rate of 7.75 percent. In addition, the judgment awarded costs and attorney's fees to the plaintiff based on the equitable fund doctrine, and in lieu of judgment against the PRTA Plan trust, judgment was entered directly against Northwest based on indemnity.

In their appeal from the summary judgment, defendants Northwest and Bank assign error to the failure to join United and other parties required for the lawsuit, the imposition of an annual interest rate, and the award of costs and attorney's fees. Plaintiff cross-appeals and makes several assignments of error, the most significant of which are the failure to terminate the Poulsbo Plan based on the alleged invalidity of § 6.06 due to the Bank's failure to endorse the amendment pursuant to § 6.01, the resulting combination of the Poulsbo Plan with the United Plan, and the failure to hold the Bank liable for the trustee's fee it paid itself upon the transfer of the Poulsbo Plan trust assets to the United trust.

The defendants, Bank and Northwest, first contend that United, the United Plan beneficiaries, the United Trust trustees, and the Poulsbo Plan beneficiaries are indispensable parties to plaintiff's action. They argue that the failure to join these parties left the trial court without jurisdiction to grant declaratory or equitable relief.

The defendants raise this argument for the first time on appeal. Normally, where an argument has not been presented first to the trial court, we will not consider it on appeal. See Bellevue School Dist. 405 v. Lee, 70 Wash.2d 947 950--51, 425 P.2d 902 (1967); Gooldy v. Golden Grain Trucking Co., 69 Wash.2d 610, 613, 419 P.2d 582 (1966). In this case, however, the failure to include an affected party, I.e., an essential party, in the action for...