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Stopford v. Boonton Molding Co.

Decided: June 1, 1970.


For modification -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. Opposed -- None. The opinion of the court was delivered by Francis, J.


This case involves a damage claim based upon an alleged anticipatory breach by defendant-employer Boonton Molding Company of plaintiff-employee William T. Stopford's vested contractual right to a lifetime pension. Defendants, Mecom, owner of all the stock of Boonton except for a few qualifying shares, and Koza and Clifton, officers of Boonton, were charged with the assumption of individual liability for payment of the pension. After trial, a jury verdict of $68,000 was returned against Boonton, Mecom and Koza. The claim against Clifton was dismissed with prejudice by consent. On appeal, the Appellate Division in an unreported per curiam opinion reversed the judgment below and remanded the cause for entry of judgment in favor of all defendants. This Court granted plaintiff's application for certification. 55 N.J. 311 (1970).

Plaintiff Stopford entered the employ of Boonton Molding Company on or about January 1, 1944. At that time Boonton was owned by George Scribner. About 1956 defendant Mecom, a resident of Texas and an owner of a number of substantial business interests in his home state and elsewhere, and two associates acquired the company. Scribner remained as the manager for five years thereafter. After Scribner left around 1960, the business was operated as a

limited partnership by Mecom and an associate, Mabel; Stopford was made general manager. In December 1961 the company was incorporated and Stopford was appointed president.

At incorporation, Mecom, then owner of the company, acquired all of its stock except a few qualifying shares. In addition he became a director and chairman of the executive committee of the board of directors with authority to act for the board. It is beyond dispute that after December 1, 1961, although the business existed in corporate form, Mecom considered that he owned it and had absolute control over it. As he put it, he operated the company as his "own personal property"; what he said controlled. He did not have to consult the board of directors; he made the decisions, whatever their nature, and passed them on. He said, "I am in charge. I operate it [the company] as a business, as an individual." In fact, he "appointed" Stopford as president of Boonton in a telephone call from Texas. Significant in this connection is a note included in Boonton's financial statement of March 31, 1964 that "[u]nder the provisions of Subchapter S of the 1954 Internal Revenue Code, the Company, with the consent of its stockholders [Mecom], has elected [since 1961] to be treated as a 'Small Business Corporation' and, as such, any taxable income or losses are assumed by the individual stockholders." Thus losses sustained by Boonton during Stopford's tenure as president were included for tax purposes with the gains or losses from Mecom's manifold individual enterprises elsewhere, particularly in his home state, Texas.

In the early part of Stopford's regime as president, a union instituted an effort to organize the Boonton production workers. Stopford and John Belding, a vice-president and director of the company, discussed means of avoiding unionization and of providing an employment inducement as well as an incentive for long-term service. One method they decided upon was the establishment of two pension plans, one for the production workers and the other for personnel

including officers of the company who would not be included in the production workers' bargaining unit. After obtaining outside expert assistance two separate plans were prepared, one for production workers which was to be noncontributory, the other for the remaining personnel, which was substantially the same in format, except that it called for contributions by the covered employees as well as by the company.

Around the spring of 1962 the two plans were presented by Stopford and Belding to Mecom, Mrs. Mecom, also a Boonton director, and Mecom's attorney, who had come up from Texas for the meeting. There is no doubt that at this time, in addition to the unionization activity, the company was suffering from financial problems. However, as the evidence reveals, Mecom was shown that if the plans were adopted certain substantial existing employee fringe benefits would be eliminated resulting in a net savings to the company of $55,000 annually over the cost of funding the pensions. Substantial testimony appears in the record that at this meeting Mecom -- whose word was law -- approved the plans and gave the word to go ahead. There is also some testimony that Mecom indicated he wanted to study the matter further.

There is no doubt that thereafter two pension plans were installed by Boonton and printed copies thereof distributed to the affected employees. One plan, covering all employees, was denominated the "Pension Plan"; the other, covering only the salaried employees, was called the "Pension Plan Contributory Group." The only difference between the two plans, except for the amount of benefits payable, was that the employees who qualified for the contributory plan were required to contribute to the pension fund. The non-contributory plan became effective on June 1, 1962, and the contributory plan on January 1, 1963. Both provided for the creation of a pension fund and the appointment of a trustee to hold the fund, i.e., to receive company and employee contributions and pay the pensions as employee eligibility

arose. Such a trust agreement between the company and a trustee was executed on January 1, 1963.

The preamble of the trust agreement recited that:

[I]t is the intention of the Company, in order to reward its present and future employees, who may qualify under this agreement, for faithful service rendered and to be rendered to the Company, to create a Pension Fund, and to assure, to the extent hereinafter provided, the sustenance of such participating employees in their old age, * * *.

The agreement specified that upon its execution, the company:

[s]hall pay into the Pension Fund, all monies required by it to be contributed to said Pension Fund, according to the terms and conditions thereof, and all sums contributed and collected by it from employees, according to the terms and conditions of said Pension Fund. * * *

The direction and management of the fund and the administration of the pension plans were committed to the "Administration Committee" exclusively, the chairman and members of which were to be appointed by the company.

The contributory plan, with which we are concerned in the present case, required each participating employee to contribute 4% of his annual compensation in excess of $4800 during each year of membership. It then provided that:

The Company shall bear the remaining cost of the Plan, and the Company shall contribute to the Trustee such amounts at such times as shall be decided by the Company. (Emphasis ours.)

The plan fixed the normal retirement date of a participant as the first day of the month next following his 65th birthday, provided he had completed 15 years of continuous service. Provision was included also for early retirement. Its text said:

A Participant may, with the consent of the Employer, retire any time after attainment of age 60 and before his Normal Retirement Age, provided such Participant has completed at least 15 years of Continuous Service.

The early retirement benefit was specified explicitly. Such a retiree was to receive a monthly benefit which would commence on his retirement date and which "shall be continued on the first regular Company payday of each month thereafter during his lifetime." The amount of the monthly benefit was to "be equal to the accrued normal retirement benefit reduced by one-half of one percent (1/2%) for each month by which the age of the applicant at Early Retirement Date is less than his age at Normal Retirement Date."

In addition to the years of service and age requirements as qualifications for a pension, the plan provided that if a retired employee, whose benefit is "vested" enters the employ of a competitor within six months after termination of his company employment, or if he "divulges to any competitive endeavor any information of a confidential nature with respect to the processes, operations or contracts" of Boonton the portion of his pension based upon company contributions to the fund "shall be forfeited."

The plaintiff's proof revealed that after the contributory plan became effective on January 1, 1963, the covered employees began to make the required contributions to the fund. It is undisputed that, except for those who had already been retired, the contributions continued until the plan was terminated by unilateral action of Boonton on September 30, 1966. Although, as noted above, Boonton had agreed "to bear the remaining cost of the [pension] Plan," i.e., the sum necessary to provide the benefit payments, no contributions had been made by it to the fund or to the trustee thereof at the time of the attempted termination. The termination action allegedly was taken at a special meeting of the board of directors held in Houston, Texas. At the meeting the board consisted of John W. Mecom, Mary Elizabeth Mecom, his wife, John W. Mecom, Jr., his son, and

Joseph D. Koza, one of the defendants herein. It was this purported termination which gave rise to the present litigation.

At the trial, Boonton raised an issue as to whether the pension plan had ever been formally or properly adopted. That issue, among others, was submitted to the jury which found in favor of the plaintiff. On appeal to the Appellate Division and to this Court the issue has been abandoned. We deem defendants' decision in that regard to be a sensible one. Adoption of the plan was clearly established. Even if there were a jury question on the subject a contrary verdict would be against the overwhelming weight of the evidence.

In 1964 Boonton had been losing money, and in February of that year Mecom, as sole stockholder and chairman of the executive committee of the board of directors, authorized the defendant Joseph D. Koza to assume complete responsibility for the operation of the Boonton Molding Company and to take "such action as you deem necessary to see that it is operated in the most efficient and economical manner." His authority was to cover "all aspects and phases of personnel, production and financing." In explaining the scope of this authority Mecom testified that since he (Mecom) owned the business and considered himself "in charge," he gave Koza "complete authority" to act in his place and stead.

In spite of Koza's presence, Boonton's business problems continued. In December 1964 apparently Koza and Mecom decided to terminate Stopford's connection with the company. Accordingly, on Saturday, December 19, 1964, Koza (who actually had no official title or position with the company) arranged a meeting with Stopford. At the meeting, according to Stopford, Koza said he had "bad news" and that Mecom wanted Stopford retired as of January 1, 1965. A discussion ensued about severance pay and early retirement under the pension plan. There is no doubt that Stopford was then qualified by age and years of service for such retirement. An agreement was reached for three months

severance pay and for early retirement as of January 1, 1965. Stopford agreed to assist in the orderly transfer of the office of president and the active management of the business. In return he was to receive his regular salary for three months and commencing with April 1965 he would receive the regular monthly retirement benefit to which he was entitled under the plan. Koza said he would have the early retirement benefit calculated.

William H. Evans, the controller and secretary of the company, testified that on Saturday, December 19, 1964 a meeting was called of the special management committee (which had been formed by Koza and of which Evans was a member). He attended and there learned that Stopford was being retired. Later the same morning Koza came to Evans' office and asked him to prepare a statement showing the monthly benefit Stopford would be entitled to under the pension plan. In about 20 minutes Evans prepared a pen and ink statement detailing the calculations showing the monthly pension benefit due Stopford under the plan. The amount established was $296.17 monthly. Evans initialed and dated the statement and hand-delivered it to Koza. A few days later Koza returned the statement to Evans. Before handing it back he wrote at the bottom left-hand corner: "Pay Wm. Stopford 3 months salary. Joe Koza." He then told Evans to see that the instructions were carried out. Stopford testified that on Monday, December 21 he obtained a copy of the statement from Evans and immediately noted on the upper right-hand corner "Pension Agreement with B.M. Co. authorized by Joe Koza, Representative of John W. Mecom, Houston, Texas."

On this appeal Stopford's claim that he was granted early retirement by Boonton is not contested.

Stopford left the company on January 1, 1965. He received monthly salary checks as severance pay for January, February and March. On March 31, 1965 a memorandum was sent by Evans' chief accountant who was a member of the ...

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