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Stevenson v. Itt Harper

OPINION FILED JULY 26, 1977.

JOHN A. STEVENSON, PLAINTIFF-APPELLANT AND CROSS-APPELLEE,

v.

ITT HARPER, INC., ET AL., DEFENDANTS-APPELLEES AND CROSS-APPELLANTS.



APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR L. DUNNE, Judge, presiding.

MR. PRESIDING JUSTICE GOLDBERG DELIVERED THE OPINION OF THE COURT:

John A. Stevenson (plaintiff) brought a declaratory judgment action against International Telephone and Telegraph Corp. (ITT) and its wholly owned subsidiary ITT Harper, Inc. Plaintiff sought compensatory and punitive damages in connection with termination of his employment by ITT Harper. Upon a stipulation of facts and after hearing testimony, the trial court, sitting without a jury, found that plaintiff had no cause of action under a pension plan agreement and awarded plaintiff five months' salary for his services as vice president of ITT Harper, less the sums plaintiff had earned while employed elsewhere during that period, and also awarded plaintiff an executive incentive bonus including interest thereon from January 1, 1972, to the date of judgment. The court denied punitive damages for an alleged inducement of a breach of plaintiff's contract. Plaintiff has appealed and each defendant has filed a cross appeal.

In this court, plaintiff contends that the pension plan agreement was ambiguous and should be construed to permit him to recover the present value of future benefits; the trial court improperly offset the salary paid to plaintiff by a third party during the remainder of plaintiff's term as vice president of ITT Harper and ITT was liable for tortious interference with plaintiff's contract with ITT Harper. Defendant ITT Harper responds that under the unambiguous terms of the pension agreement plaintiff could recover no benefits and the trial court properly reduced plaintiff's salary claim by earnings from outside sources. Defendant ITT maintains that plaintiff's discharge was an exercise of sound business judgment and therefore no tortious interference with contract rights was proved. In its cross-appeal, ITT Harper argues that the trial court erred in awarding plaintiff his salary as vice president and his executive incentive bonus plus interest. Plaintiff answers that the salary and bonus were proper allowances for breach of contract and that interest on the bonus was properly awarded.

Plaintiff began employment with H.M. Harper Co. in 1952. He signed an employment application including the words: "I understand and agree that my employment is for no definite period and may * * * be terminated at any time without any previous notice." Plaintiff, apparently an able executive, held a series of managerial positions with the company until 1963 when the board of directors elected him to a one-year term as vice president. He was reelected to this position each succeeding year, through the election of May 27, 1971.

In December 1963, the H.M. Harper board of directors adopted a resolution directing that $2500 be set aside to create a deferred compensation fund for plaintiff and another employee under a plan to be formulated in the near future. On December 15, 1964, a board resolution authorized the company president either to pay these employees $2500 each "or to enter into a pension agreement" for each of them. A witness who had been corporate secretary in 1964 testified that when presented with the choice, plaintiff elected to receive the pension agreement instead of the cash payment.

On December 28, 1964, plaintiff and the H.M. Harper president signed a "Memorandum of Agreement" (hereinafter "the 1964 agreement") which recited that plaintiff had performed efficient service to the company; that the company desired to retain plaintiff's services and further desired to compensate him for his "past and future services * * * by providing a pension, payable after his retirement, which pension is to be above and beyond his current salary * * *." The document provided: "In the event Stevenson [plaintiff] shall continue in the employ of the Company until the later of his sixty-fifth birthday or his retirement, then the Company agrees to pay to Stevenson an annual pension * * *" according to a prescribed formula based on average salary and years of service. Provision was also made for payment of a portion of the pension to plaintiff's widow provided that the company would have no duty to make payments if plaintiff died prior to retirement.

Plaintiff was also a member of the H.M. Harper Employees' Savings and Profit Sharing Trust Fund which began before 1964 and continued through plaintiff's discharge in 1971. This fund is not involved in the instant case. Separate from the 1964 agreement, the profit sharing fund included employee contributions. After his employment with ITT Harper ended in 1971, plaintiff received a lump sum distribution of $36,959.06 from this profit sharing plan of which $14,221.11 was his net contribution.

Plaintiff testified that, in 1966 or 1967, he received at least three employment offers from other companies. He declined these offers because, as he testified, "I felt very comfortable where I was."

On March 2, 1971, the shareholders of the H.M. Harper Co. approved an agreement under which H.M. Harper merged into ITT Harper, Inc., a wholly owned subsidiary of ITT. Under the terms of the merger, the surviving corporation succeeded to all "liabilities, and obligations of [H.M.] Harper * * *." The parties have not disputed that ITT Harper is bound by the 1964 agreement.

Scott Harrod, the president and a member of the board of directors of H.M. Harper and ITT Harper from 1966 to 1972, testified that in 1970 and 1971, H.M. Harper sales and profits declined substantially. In response to adverse business conditions, the witness closed down the corporate acquisitions division of ITT Harper and stopped hiring new employees. He determined that plaintiff should be terminated because his function in corporate acquisitions had been taken over by the parent corporation (ITT) which "already had an acquisition function for the entire system." The witness then notified other officials of ITT Harper and ITT concerning this decision. Harrod met with plaintiff in late July 1971 and informed him that his position would be ended at the end of the year for the reasons described above.

On December 9, 1971, plaintiff sent a letter to ITT Harper containing an "offer to retire as of December 31, 1971" and stating that plaintiff expected to begin receiving payments under the 1964 agreement. The letter also stated, "This is in no way to be construed as a resignation * * *. If you do not * * * pay me my retirement benefits * * * now, then I am holding myself ready, willing and able to perform my duties as an employee * * *." In response, Harrod wrote to plaintiff that the matter was in the hands of the parties' attorneys and that plaintiff's salary would be discontinued on December 31, 1971.

This appeal and cross-appeal raise a number of distinct issues which will be separtely considered. Additional facts will be stated as required in each instance.

The Pension Agreement of 1964

• 1 Plaintiff argues that the 1964 agreement provided for deferred compensation and, by seven years of service thereunder, he acquired a right to be paid the present value of the post-retirement payments. We cannot agree. As a general matter, the rights of the parties to a private pension agreement should be determined by the provisions of the plan. Lamphere v. Old Second National Bank of Aurora (1976), 39 Ill. App.3d 610, 612-13, 350 N.E.2d 272, leave to appeal denied (1976), 63 Ill.2d 557; Anger v. Bender (1975), 31 Ill. App.3d 877, 880, 335 N.E.2d 122, and cases there cited.

The agreement before us initially recites the employer's desire to retain plaintiff's services and to compensate him "for his past and future services to the Company by providing a pension payable after his retirement, which pension is to be above and beyond his current salary * * *." The agreement then states: "In the event Stevenson shall continue in the employ of the Company until the later of his sixty-fifth birthday or his retirement, then the Company agrees to pay to Stevenson an annual pension * * *."

By this language, the duty of the company to pay pension benefits is expressly conditioned upon plaintiff's continued employment, at least until age 65. We find no language in this agreement by which the company agreed to pay any amounts if the employment relationship were terminated before plaintiff reached retirement age. The parties specified no date for the vesting of any pension right other than the later of plaintiff's 65th birthday and his retirement. Further, the agreement makes no provision for the vesting of partial pension benefits in the event plaintiff's employment terminated prior to retirement and attainment of age 65. The fact that the parties intended to condition plaintiff's right to pension payments upon his continued employment until the later of the two specified events is also shown by ...


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