Court Opinion

ID: 9681055
Source: CourtListenerOpinion
Date Created: 2023-08-24 07:43:20.067441+00
Date Added: 2024-06-11T18:17:30.902850
License: Public Domain

HUGHES, Justice
(dissenting).
The purpose of the Profit-Sharing and Incentive Plan before us is stated to be:

“Purpose

“The purpose of this Plan is to help employees provide security for their retirement and to provide a means for the sharing with employees of profits of the Employer,”
“Employees” in the Plan are defined by it to mean “all active officers of the Corporation and all employees receiving compensation for their services.”
*312Section 2-2 of the Plan provides:
“Section 2-2. Participants. All employees who have or will have, completed one year of continuous service with the Employer shall become eligible to participate under this Plan in the contribution for the year in which they so qualify and in the contribution for each succeeding year during the period of their continuous employment with the Employer. All such employees are herein sometimes called ‘Participating Employees.’ ”
The trustees of the Plan are appointed by the Board of Directors of the Corporation.
The Plan provides regarding the duties and authority of the trustees, in part, as follows:
“The Trustees shall serve until their respective successors are appointed, and shall have all powers necessary or appropriate to carry out the functions herein designated and otherwise to administer the Plan and to interpret it, and their determination on all matters relating to the Plan shall be conclusive and binding upon all persons having or claiming to have any interest hereunder.
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“(b) Any action taken by a Trustee or Trustees less than a majority, or by any other person or persons appointed as an agent or agents of the Trustees, as provided for in this agreement, shall constitute action by the Trustees, and such action shall be binding upon the Trust the same as if all the Trustees had joined therein.
“(c) Nothing in this agreement shall restrict the rights of an individual Trustee who is also an employee from being entitled to participate in the benefits of this agreement, or restrict his rights with respect to any funds or cash to be used to or for his benefit. However, no individual Trustee shall have any right to vote or decide upon any matter relating to himself individually, or to his particular benefits as a participant hereunder, but any such matter shall be voted or decided upon exclusively by the other Trustees.”
Section 4-2 of the Plan provides, in part:
“Section 4-2. Leaving Employer’s-Service.
“(a) Before Ten Years’ of Service. A Participant who leaves the service of the Employer (other than by reason of death, retirement, permanent disability, or authorized leave of absence) prior to completion of ten (10) years continuous employment subsequent to July 1, 1947, shall receive nothing.”
Section 4-3 of the Plan provides:
“Section 4 — 3. Distribution of Forfeitures. Any amounts forfeited during a fiscal year shall be entered in a separate account, or accounts, as soon as practicable after June .30 of each year, all amounts forfeited during the year shall be credited to the accounts of those who are Participants on said June 30, each Participant receiving credit for that proportion of the forfeiture which the balance of his account bears to the total of all such balances of all Participants.”
In Section 5-2, paragraph (i) of the Plan, it is provided:
“(1) Except as herein otherwise provided, the Trustees shall have all the rights, powers, privileges, and duties, and shall be subject to all the provisions, conditions, and limitations contained in the Texas Trust Act, as said Act now exists or may from time to time be amended, or any similar act which may from time to time be applicable to trusts administered in the State where this Trust is administered.”
*313The record shows that the following accounts of the named employees have been forfeited by the trustees of the Plan:
“Charles D. Rankin $2,772.31
Roland E. Schweer 2,778.24
Mildred M. Graham 1,079.24
Leigh Cardwell 2,009.84
Pat Hales 1,165.51
Wray Post 1,123.94
Frances Hartwig 1,695.33
William T. Martin 2,438.97
Daniel E. McKenna 1,463.81
Margaret Garrett 1,285.78
Dora Ziebell 1,245.72
Lewis Hartwig 2,300.11
Jacque Elliott 618.74
John Roark 1,933.03
Timoteo Jiminez 730.51
Waylan Lee Johnston 1,513.06
Larry Taylor 211.06
Jose A. Gallardo 572.15
E. de la Cruz 1,130.20
Hank Page 1,971.34
Edward Badeaux 1,662.81
Gerald W. Whitaker 652.98
Sallye Jones 1,508.45
Fran Page 503.79
Virgil Jorgensen 1,297.16
Jose Rocha 206.42
Arnold Walker 541.56
Alex Ramirez 1,060.84
Romeo Escobar 434.58
Leonel Adams 368.53
T. Marshall Weaver 1,780.20
F. L. Soderquist 866.42
Frances Cohrs 357.27
C. H. Rollie Rowlands (Rollie Rosslando) 154.36
Gene Riethmeyer 355.49
Connie Houghland 169.23
W. L. McCormick 307.58
Donald Houghland 987.93
Vincent Neuhaus 142.04”
These employees had been employed by the Corporation for about three years or less.
There were originally five trustees and it appears that the number of trustees has remained constant but that their identities have changed. Of the five trustees who forfeited the above accounts, four were officers or employees of the Corporation and hence will personally benefit from the forfeitures of their coemployees’ accounts.
Appellees, relying upon the provision in the Plan that the determination of the trustees on all matters relating to it shall be conclusive, make this statement in their brief.
“Thus, even if another interpretation of the plan were feasible — and we think the plan is subject only to the interpretation that Appellants are entitled to no payments — the interpretation placed on the plan by the Trustees is binding. Appellants, therefore, have no grounds for recovery.”
It is my opinion that the action of the trustees in forfeiting the accounts of appellants is void for these reasons:
(1) the trustees, except one, acted on a matter which was to their “particular benefits as a participant” in violation of the specific terms of the Plan;
(2) the trustees’ action is against public policy.
This latter reason is self evident, however, I wish to quote from Patton v. Babson Statistical Organization, Inc., 259 Mass. 424, 156 N.E. 534, by the Supreme Judicial Court of Massachusetts because it concerns a profit-sharing or deferred salary plan. The plan provided that, “If any question arises as to the interpretation or application of any feature of the plan, the decision of the president shall be final.” In holding this provision invalid the Court approved the following language from Brocklehurst & Potter Co. v. Marsch, 225 Mass. 3, 113 N.E. 646:
“It would be a travesty upon all ideas of judicial propriety or of judicial work for a man to be an arbitrator to settle the amount of his own liability. It is contrary to natural right and fundamental principles of the common law for one to judge his own cause.”
*314This brings me to a discussion of the fact that one trustee was not disqualified by interest and that the Plan makes the action of one trustee the action of all.
The Plan is made subject to the provisions of the Texas Trust Act. Such Act, in Art. 7425b-18, V.A.C.S., provides in part:
“Unless it is otherwise provided by the trust instrument, or an amendment thereof, or by court order:
“A. Any power vested in three or more trustees may be exercised by a majority of such trustees; * *
The general rule is that trustees of private trusts must all join in an action unless by statute or the terms of an instrument a majority of the trustees is authorized to act. Hart v. First State Bank of Seminole, 24 S.W.2d 480, El Paso C.C.A., writ ref.
I construe the above statute as authorizing boards of three or more trustees to act by a majority where the trust instrument does not require unanimity. The granting of affirmative statutory authority to act by a majority under such circumstances is, under well established rules of statutory construction, a negation of authority for trustees, three or more, to act by less than a majority. In my opinion, one qualified trustee was not authorized to act for all trustees in this matter.
Appellees, and the Court, treat the Plan as a charitable trust. In this, I believe they err. It will come as a shock, I feel sure, to some of the employees or officers of this Corporation to learn that they, by participating in this Plan, are the recipients of charity.
It is my opinion that payments under the Plan are compensation.1 No taxes thereon are paid by the Employer. Federal taxes are paid by the employees on payments received under the Plan. The record demonstrates that the Plan inures to the benefit of Employer and Employee.
From a letter from the Chairman of the Board of Trustees of this Corporation to participants in the Plan, I quote the concluding sentence:
“For the Company which derives the benefit of your loyal and dedicated service, I thank you.”
See Annotation on this subject in 81 A.L.R.2d p. 1070.
It is not established as a matter of law, in my opinion, that appellants left the employ of the Corporation. If the termination of their service with the Corporation was involuntary and without fault on their part, then, under the following authorities, they did not leave their employment within the meaning of the Plan. Muesling v. International Ry. Co., 85 Misc. 309, 147 N.Y.S. 177, Supreme Court of New York, Gardner v. Metropolitan Life Ins. Co., 225 Mass. 439, 114 N.E. 717, Supreme Judicial Court of Massachusetts. See annotation on this subject in 81 A.L.R.2d p. 1078, et seq.
Appellants had worked for this Employer for three years or less. Some had credited to their accounts more than $2500.00. Ap-pellees concede that had these employees worked just short of ten years and even though their accounts might approach $10,000.00, yet, under the circumstances occurring here, they would lose it all.
The Plan, magnanimous and generous ás it is, should not be construed to deal such a crushing blow to the hopes, dreams and expectations of faithful employees if within the limits of reason and law it can be avoided.
The very least that these employees are entitled to is that their claims be determined by trustees who are free from conflicting self interest. I would reverse and remand this case for appropriate proceedings in equity.
I respectfully dissent.

. This is the holding under similar facts in Lee v. Lee, 112 Tex. 392, 247 S.W. 828, followed in Herring v. Blakeley, 385 S.W.2d 843, Tex.Sup.