Court Opinion

ID: 6929526
Source: CourtListenerOpinion
Date Created: 2022-07-23 23:50:51.300078+00
Date Added: 2024-06-11T16:07:05.699446
License: Public Domain

DAVID R. THOMPSON, Circuit Judge,
concurring in part and dissenting in part.
Although I concur in Parts I, IIA and IIBii of the majority opinion, I respectfully dissent from Part IIBi. In my view, Rice’s rights under his employment contract had not vested when the RTC took over MeraBank Savings and Loan, and as a result the RTC had the power to terminate his employment contract without liability, including the provision for salary continuation.
Rice’s right to salary continuation payments after termination of his employment was subject to a condition precedent: He had to retire' after age 57 and before he was discharged for cause. That he chose to work beyond age 57 did not eliminate this contingency. So long as he chose to continue working and to receive the benefits of active employment he did so at the risk of discharge for cause prior to his voluntary retirement. His rights were not vested.
The majority gets rid of the vesting problem by erasing it from Rice’s contract when he turned 57. Thereafter, according to the majority, it simply wasn’t in the contract because from then on all Rice had to do was retire and he would be entitled to his salary continuation payments. Of course, that is not what the contract said. It said Rice could get his retirement payments after age 57 provided he retired before he was discharged for cause. Rice could have eliminated the contingency by retiring after age 57, but he didn’t. Thus, when the RTC took over MeraBank it could terminate Rice’s contract without liability for the non-vested salary continuation payments.
The majority’s reliance upon ERISA is misplaced. Under ERISA “vested” and “nonforfeitable” are synonymous. Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 376-77, 100 S.Ct. 1723, 1733-34, 64 L.Ed.2d 354 (1980). ERISA defines non-forfeitable as “unconditional.” 29 U.S.C. § 1002(19). As the majority points out, this subsection also contains an exception to the general definition:
For purposes of this paragraph, a right to an accrued benefit derived from employer contributions shall not be treated as forfei-table merely because the plan contains a provision described in section 1053(a) of this title.
This language does not help Rice. Section 1053(a) sets forth very specific exceptions to the general requirement that a benefit must be unconditional to be vested. The condition in Rice’s employment contract, that he retire before being discharged for cause, is not at all similar to any exceptions found in section 1053(a). Under the doctrine of expressio unius est exclusio alterius, the condition precedent in Rice’s contract is not excepted from the general rule that benefits must be unconditional to be vested.
*1380Nor is the majority’s position buttressed by reference to tax law. The majority cites 26 C.F.R. § 1.83-3 for the proposition that “termination for cause does not amount to a ‘substantial risk’ ” which would prevent property from being “substantially vested.” Section 1.83-3, however, applies only to section 83 of the Internal Revenue Code. Section 83 regulates the taxation of property transferred in connection with the performance of services. Thus, under section 83, if property has already been transferred, it is vested and taxable even if subject to the condition subsequent that the owner forfeits the property if he or she is subsequently terminated for cause. Property already transferred but subject to a condition subsequent differs substantially from a promised employee benefit that is subject to a condition precedent.
Moreover, the Treasury Regulations address the issue of tax liability, not the rights of employees to receive benefits. The policy concerns of fair and prompt taxation that may have motivated the IRS to label property vested (and therefore taxable) for revenue collection purposes do not apply in this case.
Nachman is of no help to the majority, because it is inapposite. There, the Court found that conditioning employee benefits on the solvency of a pension fund did not prevent the benefits from being vested. Nachman, 446 U.S. at 378, 100 S.Ct. at 1734. ERISA was enacted to address, in part, the problem of fund insolvency; the Nachman holding was necessary to bring most pension plans under the authority of ERISA. Id. at 378-79, 100 S.Ct. at 1734-35.
Here, Rice’s benefits are subject to a condition precedent applicable specifically to him. By inserting this provision into Rice’s contract, the parties did not attempt to make an end-run around ERISA; the provision is a reasonable precondition to Rice’s receipt of salary continuation payments, namely, that he not be terminated for cause.
In interpreting the terms of a contract, we must follow the plain meaning of the words used. Trident Center v. Connecticut General Life Ins. Co., 847 F.2d 564, 569 (9th Cir. 1988). Although the word “vested” does not appear expressly in Rice’s contract, it is part of the contract nonetheless. 12 C.F.R. § 563(b) (all employment contracts between a FSLIC insured institution and its employees must contain the provisions of 12 C.F.R. § 563.39(b), which provides that “vested” rights may not be abrogated by the RTC). If an employment contract fails to contain this provision, it is read into the contract as an implied term. Rush v. Federal Deposit Ins. Corp., 747 F.Supp. 575, 577 (N.D.Cal.1990). Black’s Law Dictionary defines vested as “fixed, settled, absolute. Having the character or given the rights of absolute ownership; not contingent; not subject to be defeated by a condition precedent.” (emphasis added). Under the plain meaning of the word “vested”, Rice’s benefits, which were subject to a condition precedent, were not vested.
For the foregoing reasons, I would affirm the district court across the board and hold that neither Modzelewski’s nor Rice’s contract rights were vested when the RTC took over MeraBank Savings and Loan.