Reese v. Administrative Committee

KINGSLEY, J.

The facts involved are not in dispute, substantially all being stipulated and uncontroverted. On December 29, 1953, the Wayne Manufacturing Company (hereafter referred to as either “Company” or “employer”) promulgated and created a profit sharing trust (hereafter referred to as “Trust”) for the benefit of its then and future ■eligible employees. The trust instrument delegated to an administrative committee, composed of employees of the Company, the power to construe the Plan and Trust, and to determine all questions that shall arise thereunder. Plaintiffs’ deceased husband and father, Warren G. Reese, was employed by the Company at the time of the creation of the Trust. An account in his name was opened and carried on the books of the trustee. As of December 31, 1958, there stood to the credit of such account the sum of $6,564.92.

However, during his lifetime, Reese had successfully concealed from the Company that, for at least the last 12 months immediately preceding the date of his death, he had

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embezzled money from the Company in excess of $50,000. The Company did not learn of Reese’s dishonesty and embezzlement until after his death. As soon as it did, it entered a discharge memorandum on its records “discharging Reese as of May 20, 1959,” the day before .his death, that being the last day on which he was present at the premises of the employer Company. The administrative committee, upon being apprised of the dishonesty and embezzlement of Reese, and of the Company’s action when it learned of such misconduct, held a meeting and unanimously determined that no benefits were payable to plaintiffs under the Trust since Reese would have been ineligible to participate in the benefits thereof “according to Article 2, paragraph 5 of the Trust.”

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Plaintiffs, claiming as Reese’s designated beneficiaries, made demand for the entire sum of $6,574.92 credited to the account standing in his name, on the trustee’s books. This demand was denied, and this action was then brought. The suit against the employer was dismissed and the action proceeded to trial only against the administrative committee and the trustee.

The trial court adopted the argument advanced by plaintiffs, and ultimately excluded from evidence, and rejected and refused to consider, all the stipulated facts, testimony and offers of proof relating to fraud, dishonesty and embezzlement of plaintiffs’ deceased, as well as evidence and offers of proof relating to the intent of the trustor. The gist of plaintiffs’ contention was that, since Reese died before his concealed fraud and misconduct could be discovered, his discharge therefore could not be effected during his lifetime, and his status as a participant in the Trust could not thereafter be questioned. They based this contention upon a provision in paragraph 2(b) of article Y of the Trust, that upon the death of a participant his interest in the Trust becomes vested and nonforfeitable. Plaintiffs insist that, since Reese was not discharged during his' lifetime, his interest became vested and nonforfeitable. Accordingly, judgment was entered in favor of plaintiffs, based on the above theory.