Case Name: James McNevin, Respondent, v. The Solvay Process Company, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1898
Citations: 32 A.D. 610
Docket Number: 
Parties: James McNevin, Respondent, v. The Solvay Process Company, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 32
Pages: 610–622

Head Matter:
James McNevin, Respondent, v. The Solvay Process Company, Appellant.
Master and servant—a pension fund established by a corporation for the benefit of its employees — the employees have no vested interest in it until it is paid to them.
A manufacturing corporation established a pension fund for the benefit of a class of its employees and certain rules for the establishment, administration and application of the fund, no part of which was derived from the wages of the
, employees or contributed- by them, the fund being voluntarily set apart by the corporation from its profits, and such rules provided that the fund should remain the sole property of the corporation and absolutely subject to the control of its trustees; that an employee could in no case demand payment of the sum credited on his account except when the corporation should adjudge the account to he payable (the sums allotted being expressly declared to be gifts), and that the trustees were authorized to' decide all questions concerning the fund without appeal.
Held, that the corporation was not liable to an employee in an action at law for an amount credited from such fund upon his pass hook, the trustees having decided after hearing.the employee that he was not entitled to payment; that the gift must be completed by actual payment before the employee obtains any vested interest in it:
Ward and Green, JJ., dissented.
Quaere, whether the disposition and management of such a fund may be the subject of control in an action in.equity in which it appears that the defendant's--.trustees are squandering the fund or are guilty of had faith in its management.
■ Appeal by tbe defendant, Tbe Solvay Process Company, from a judgment of the County Court of Onondaga County in favor of the plaintiff, entered in the office of the clerk of the county of Onondaga on the 11th day of November, 1897, upon the verdict of'a jury, and also from an order dated the 1.1th day of November, 1897, and ■entered in said clerk’s office, denying the defendant’s motion for a .new-trial made upon the minutes.
William G. Tracy, for the appellant.
P. J. Ryan, for the respondent.

Opinion:
Follett, J.:
This action was begun May 14, 1897, to recover fifty-two dollars and fifty-four cents alleged to be due- from the defendant to the plaintiff as his share of a pension fund established by the defendant for the benefit of a class of its employees. The defendant is a domestic corporation engaged in manufacturing at the city of Syracuse, New York, and employs in its business between 2,000 and 3,000 persons. The plaintiff entered the service of the defendant-June 18, 1890, and continued therein until April 6, 1895, when-he was discharged. January 1, 1892, the defendant established what is known as a pension fund for the benefit of a class of its employees and at the same time established a set of rules and -regulations providing how the fund should be established, for whose benefit, how administered and how applied for the benefit of the employees entitled to participate therein. The employees are paid stipulated wages, and no part of the fund is derived from their wages, or contributed to by them, but it is voluntarily created by the defendant setting apart a portion of its profits belonging.to its shareholders, which, through the action of the corporation, are voluntarily relinquished for -the benefit of its employees, pursuant to the scheme set forth in the printed rules and regulations.
In the 1st article of the rules and regulations it is stated that " the object of these funds is to provide a means of support when, by reason of accident, sickness or advanced age, labor must cease." By the 2d article it is provided that the funds shall be and remain the sole property of the defendant, and absolutely subject to the control of its trustees, and that, in no case, can an employee demand payment of the sum credited on his account, except when the defendant shall adjudge the account to be payable in whole or in part, in accordance with the rules and regulations established. By the 3d article the sums set apart are expressly declared to be gifts, and that the sums allotted to the employees remain the property of the defendant until they are actually paid over to the employees, and by the 4th article it is provided that the fund is to remain under the sole control of the defendant's 'trustees, who are authorized to decide all questions concerning the rights of employees in the fund without appeal. By the 5th article it is provided that the trustees shall be under no obligation to set apart, during any year, any portion of its earnings as part of the pension fund, unless it shall be found that the profits of the year are sufficient to enable it to do so after discharging the obligations of the defendant,' including dividends te its shareholders. There is no limit as to the amount of dividends which may be declared to shareholders. By the 9tli article it is provided that final payment of an account of an employee shall be made in case he has retired from actual service after attaining the age of fifty-five-years, or after attaining the age of fifty years, having served the defendant twenty years, or after twenty-five years' service without condition as to age. It is also provided that in case an employee is discharged without a cause of dissatisfaction, and, especially, if on account of the necessity of diminishing the number of employees, the amount credited to such employees shall be paid according to the rules and regulations established. By the same article it is provided that the defendant, instead of paying over the amount in cash, may purchase an annuity for the benefit of the employee. By the 11th article it is provided that, in case an employee leaves defendant's service for any cause, including dismissal, the trustees, may keep back the whole or part of his account for a period not exceeding five years, on condition of paying him the income upon the sum, the sum to remain as security for the performance by the employee of his engagement not to injure the defendant after leaving its service by disclosing its processes. By the 12th article it is provided that, in case an employee dies in the service of the defendant, the sum standing his credit shall be. paid to his widow, children, family or personal representative, as may be determined by the defendant's trustees.
It is conceded that this pension fund has been created voluntarily and is a gift by the defendant, and the question upon which this case turns, is whether, when a sum is credited to an employee on the pass book furnished by the defendant, the employee has a vested right in the sum so credited, or whether, under the terms by which the fund is established, the employee acquires no vested right until the gift is completed by actual payment to the employee ? It must be conceded, at the outset, that a person or a corporation proposing to give a sum for the benefit of any person or any set, of persons has the right to fix the terms of his bounty, and provide under what circumstances the gift shall become vested and absolute. Under' the regulations established it seems to me that none of the employees has a vested interest in any part of this fund, even though credited upon their pass books, until the gift is completed by actual payment. Until that' time it is an inchoate gift. The articles provide that an employee cannot in any case demand payment of the sum credited to his account, except when the defendant shall adjudge the account to be payable in whole or in part, according to the rules and regulations established, and it is also provided that the sums credited shall remain the property of the defendant until actually paid, and that the fund shall be and remain under the sole control of the defendant's trustees, who are authorized to decide all questions concerning it without appeal. In this case the defendant's trustees decided 'after a hearing of the plaintiff that lie was not, when the action was begun, entitled to payment of any portion of the fund credited to him, and it seems to me that, under the terms of the gift, this decision is final, unless within the discretion of the defendant's trustees it shall be modified in the future. In ease it shall be held that this plaintiff had. a vested right in the fund credited to his account, it would necessarily follow that it might be reached by his creditors through proceedings supplementary to execution, and thus the very object of creating the fund would be destroyed. If it be held that this plaintiff had a vested right in this fund when he ceased to be employed by the defendant, it would follow that every other employee who had left the- service of the defendant from any cause would have a vested right in this fund which might be appropriated by his creditors. It seems to me that the scheme by which this fund is created is simply a promise on the part of the defendant to give to its employees a certain sum in the future with an absolute reservation that it may at any time determine not to complete the gift, and if it does so determine, an employee has no right of action to recover the sum standing to his credit on the books of the pension fund. Whether the disposition and management of this fund may or may not be the subject of control in an equity action in case it should be alleged and proved that the defendant's trustees were squandering the fund or were guilty of bad faith in its management, is a question not before the court, •this being a simple legal action to recover the sum standing to the plaintiff's credit on the theory that when he left the employment of the. defendant he acquired an absolute vested right in the sum credited, which he has the right to recover.
The judgment and order should he reversed and a new trial granted, with costs to the appellant'to abide the event.
Hardin, P. J'., and Adams, J., concurredWard and Green, JJ., dissented. '