Court Opinion

ID: 9561031
Source: CourtListenerOpinion
Date Created: 2023-08-21 18:01:32.46671+00
Date Added: 2024-06-11T09:13:29.521065
License: Public Domain

BERNSTEIN, Justice
(dissenting).
I readily agree that “the rationale of the Denney case is basically determinative of the instant appeal,” but I am constrained to disagree with the conclusions of the court that the legislative enactment here reviewed is a “less drastic” change in the pension scheme than was sustained in the Denney case and that the change here is beyond challenge by one whose pension rights are adversely affected.
Our Constitution, Article 9, Section 7, A.R.S., like those of California and Washington, prohibits the state and local gov*390ernmental subdivisions' from ever making “any donation or grant, by subsidy or otherwise, to any individual, association, or corporation * * Accordingly, to avoid the serious constitutional problem which would be posed, we were, and are, required to reject the view expressed by some courts, see, e. g., Kinney v. Contributory Retirement Appeal Board, 330 Mass. 302, 113 N.E.2d 59; Roach v. State Board of Retirement, 331 Mass. 41, 116 N.E.2d 850; McCarthy v. State Board of Retirement, 331 Mass. 46, 116 N.E.2d 850, 852, that government employees’ pension programs involve gratuitous donations from the state, to which prospective pensioners can have no right whatever prior to receipt of the donation, or at least prior to the time a pension donation becomes due and payable. “For this reason,” as said by the Supreme Court of Washington, “the cases from those jurisdictions which follow the so-called majority rule cannot be persuasive here, for, as was pointed out in Kern v. City of Long Beach, 1947, 29 Cal.2d 848, 179 P.2d 799, they were apparently decided under different constitutional provisions.” Bakenhus v. City of Seattle, 48 Wash.2d 695, 698, 296 P.2d 536, 538; see also Bender v. Anglin, 207 Ga. 108, 112, 60 S.E.2d 756, 760. Moreover, to recognize that pensions represent deferred compensation earned during the course of employment and held out as part of the inducement and promise of employment is only to acknowledge what is an apparent fact of this age. See, e. g., Bender v. Anglin, supra; Weinberg, Significant Trends in Pension Planning for Public Employees, 11 Public Personnel Rev. 78 (1950); Kneir, City Government in the United States 487-489.1 Thus, the Denney case necessarily and wisely said, 84 Ariz. 394, 398-399, 330 P.2d 1, 3-4, that
“ * * * certain rights [were] given to the officer that must be respected. Subject though to reasonable *391modification and changes in the law by the legislature.
sjc % 5|s ‡
“ * * * The courts are fairly well in agreement that, prior to retirement, permitting reasonable legislative modification of pensions is necessary since pension systems must be kept flexible to permit adjustments in accord with changing conditions and at the same time maintain the integrity of the system and carry out its beneficent policy. The permissible scope of change is for the courts to determine on the record presented. Necessarily such modifications must be reasonable.”
In result, although the conclusion reached in the Denney case was at variance with Hickey v. Pittsburgh Pension Board, 378 Pa. 300, 106 A.2d 233, 52 A.L. R.2d 430 — perhaps because the legislative change there reviewed, forbidding compensation from two governmental agencies, involved a subject so much within the realm of unreviewable political choice- — - the decisional approach was that suggested by the Pennsylvania, California and Washington cases. See, e. g., the recent cases of Harvey v. Retirement Board of Allegheny County, 392 Pa. 421, 141 A.2d 197; Wright v. Retirement Board of Allegheny County, 390 Pa. 75, 134 A.2d 231; Rupert v. Policemen’s Relief and Pension Fund, 387 Pa. 627, 129 A.2d 487; Abbott v. City of Los Angeles, 50 Cal.2d 438, 326 P.2d 484; Allen v. City of Long Beach, 45 Cal. 2d 128, 287 P.2d 765; Bakenhus v. City of Seattle, supra. If the Court now disparages the authority of those cases (all except the Washington case, incidentally, decided after any case cited by the majority), it also must be critical of the Denney case. If it relies on the quoted portion of 3 McQuillin’s Municipal Corporations Section 12.144, it must ignore the immediate addition to the text entered by the 1958 Cumulative Supplement, p. 138, that “Any revision of pension plan structure, however, which adversely affects the rights of the participants, must bear some material relation to the theory of the particular pension system and its successful operation or it will have prospective application only to the rights of new members. It has also been held that the disadvantages resulting to members from a revision should be offset by comparable new advantages.” If it finds it “wholly incongruous to think of the right to a pension as being ‘vested’ ”, it must take a step reverse to the developmental trend of the cases influenced by “the now generally accepted theory that pensions are a part of the compensation of an employee to which, under ordinary circumstances, he is as much entitled as he is to wages paid him for the work he has actually performed,” Annotation, 52 A.L.R.2d 437, 441, and reject the considered opinion expressed in 3 *392Antieau, Municipal Corporation Law Section 22.11, p. 257, to the effect that a vested rights rule such as that adopted by the California Supreme Court represents “the better view”. If it seeks “certitude” beyond what the cited cases provide,2 it must abandon the attempt of the Denney case as well as the effort of other courts to reconcile the competing equities of the state in favor of flexibility and the employee in favor of stability, consistent with traditional concepts of contract law. See Note, Contractual Aspects of Pension Plan Modification, 56 Col.L.Rev. 251.
Read in light of the foregoing, the Denney case [84 Ariz. 394, 330 P.2d 4], utilizing its own words, recognizes that a governmental employee possesses “certain rights” in the nature of contractual rights fixed by the promise of the employer at the time of employment, subject to unilateral change by the employer only when such change is shown to be reasonably required to adjust the pension plan to “changing conditions and at the same time maintain the integrity of the system and carry out its beneficent policy.” The question in each case, then, to be answered “on *393the record presented,” is whether the change is shown to be reasonably required to preserve the integrity of the pension system, i. e., to enhance its actuarial soundness, or, as the court apparently determined in the Denney case, is a reasonable change promoting a paramount interest of the state without serious detriment to the employee.
The mere statement of that question answers itself in this case. First, considering the likelihood that the average monthly compensation of most employees will be greater if measured by the year preceding retirement than if measured by the five-year period preceding retirement, it is self-evident that the legislative change here reviewed would reduce the pension of many employees relying on the earlier law, as it would reduce the plaintiff’s pension. No more drastic or sweeping change affecting the prospective pensioner, short of total elimination of the pension fund, is conceivable. If the legislature can without any showing of Justification reduce the amount payable to a prospective pensioner like the plaintiff by some $22, no reason appears why it cannot reduce the amount payable to one dollar. In brief, if the instant legislative change is summarily approved, the rights of the employee become as nothing. Second, proceeding by motion for summary judgment, the defendant, of course, has not shown that the challenged change was reasonably required to preserve
the integrity of the fund or that plaintiff could not make a contrary showing. If any assumption is appropriate in the absence of evidence in that regard, I would think it to be that, even if the fund is ifi jeopardy, means are available to augment it without reducing the payments which were an implicit promise of the plaintiff’s employment. Cf. A.R.S. §§ 9-923 and 9-921 and A.C.A.1939, §§ 16-1812 and 16-1810, providing for additional or variable contributions to the fund by the municipality as the means of insuring the actuarial soundness of the fund. In any event, if the notion — to which the present majority even yet pays lip service — that only reasonable modifications are permitted is to have any meaningful life, it can only be implemented by providing an opportunity to challenge the reasonableness, i. e., the rational basis, for a legislative modification by the presentation of relevant facts. Compare Chastleson Corp. v. Sinclair, 264 U.S. 543, 44 S.Ct. 405, 68 L.Ed. 841; City of Hammond v. Schappi Bus Line, Inc., 275 U.S. 164, 48 S.Ct. 66, 72 L.Ed. 218; Borden’s Farm Products Co., Inc. v. Baldwin, 293 U.S. 194, 55 S.Ct. 187, 79 L.Ed. 281; Thompson v. Consolidated Gas Co., 300 U.S. 55, 69-70, 57 S.Ct. 364, 81 L. Ed. 510; United States v. Carolene Products Co., 304 U.S. 144, 153-154, 58 S.Ct. 778, 82 L.Ed. 1234; Polk Company v. Glover, 305 U.S. 5, 10, 59 S.Ct. 15, 83 L. Ed. 6; State Board of Barber Examiners *394v. Edwards, 76 Ariz. 27, 31, 258 P.2d 418, 420-421. As Mr. Chief Justice Hughes said in the Borden’s case, 293 U.S. at page 210, 55 S.Ct. at page 192 “ * * * where the legislative action is suitably challenged, and a rational basis for it predicated upon * * * particular economic facts * * * which are outside the sphere of judicial notice, these facts are properly the subject of evidence and of findings.” If such inquiry is feared because of its difficulties, it is meet to answer that the difficulties are of the sort with which courts, in assessing reasonableness, have long been familiar. Thus, in so far as a legislative enactment is shown to be reasonably required in one situation — for example, to protect the fund of one city— but not in another and the two situations cannot with facility be treated separately, that fact may be taken into account in aid of the legislation. See United States v. Carolene Products Co., supra. To withdraw from the inquiry and decide the case, as does the majority opinion, as though there were “no factual question to determine” is to assume by judicial notice economic facts which are not known' and which, a priori, are unknowable: (1) that the fund of the city of Tucson was inadequate or in danger of serious depletion when the 1952 modification was enacted; or (2) that the fund of some- Arizona city was in that posture and ameliorative legislation could not easily be enacted without affecting the policemen of Tucson; and (3) that other means of correcting the situation, such as that suggested by the above cited statutory provisions or such as enacting legislation to have effect only with respect to later employed policemen, was sufficiently impracticable so as to render the means chosen a not unreasonable remedial solution.
I would reverse the decision below and remand the case for trial so that, in conformity with the spirit of the Denney case and what I consider the better view, the court can have the benefit of findings based on relevant facts, not legislative fiat.
STRUCKMEYER, J., concurs in the dissent.

. The majority opinion mentions in passing that appellant was first employed prior to the enactment of the 1937 pension law upon which he now relies. If the majority means to imply that that fact should make a difference in result, as was held in the Denney case, 84 Ariz. 394, 398, 330 P.2d 1, 3, I wish to specifically note my dissent to that proposition. Appellant may not have entered the service of the City with a pension in mind, but he did continue in such employment for some sixteen years after a pension was provided for, during a period when pension provisions increasingly became a prominent feature of private employment contracts. Appellant’s forbearance in not leaving his employment (which also can be analyzed as a series of affirmative acceptances of employment for each contract term) must be considered analytically as the legal equivalent of first entering employment when the promise was outstanding. Cf. A.L.I., Restatement of Contracts Section 90; Hunter v. Sparling, 87 Cal.App.2d 711, 197 P.2d 807; West v. Hunt Foods, Inc., 101 Cal.App.2d 597, 225 P.2d 978.

. See, e. g., Harvey v. Allegheny County Retirement Board, 392 Pa. 421, 431-482, 141 A.2d 197, 203:
“We may thus summarize the law relating to the rights of a public employe in a retirement system as follows:
“1. An employe who has complied with all conditions necessary to receive a retirement allowance cannot be affected adversely by subsequent legislation which changes the terms of the retirement contract.
“2. An employe who has not attained eligibility to receive a retirement allowance may be subject to legislation which changes the terms of the retirement contract if the' change is a reasonable enhancement of the actuarial soundness of the retirement fund.
“3. An employe who has not attained eligibility to receive a retirement allowance may not be subject to legislation which changes the terms of the retirement contract if the change does not reasonably enhance the actuarial soundness of the retirement fund.”
As for the California cases, suffice it to say that whatever disparity of view existed at the the time the early decisions were reviewed in Lickert v. City of Omaha, 144 Neb. 75, 12 N.W.2d 644, the recent Kern, Allen and Abbott cases constitute an unbroken line of California Supreme Court authority, drawn from experience and painstaking reflection, that, as said in the Allen case [Allen v. City of Long Beach], 45 Cal.2d 128, 131, 287 P.2d 765, 767:
“An employee’s vested contractual pension rights may be modified prior to retirement for the purpose of keeping a pension system flexible to permit adjustments in accord with changing conditions and at the same time maintain the integrity of the system. [Citing cases.] Such modifications must be reasonable, and it is for the courts to determine upon the facts of each ease what constitutes a permissible change. To be sustained as reasonable, alterations of employees’ pension rights must bear some material relation to the theory of a pension system and its successful operation, and changes in a pension plan which result in disadvantage to employees should be accompanied by comparable new advantages. * * * ”
See also Cochran v. City of Long Beach 139 Cal.App.2d 282, 293 P.2d 839; Glaeser v. City of Berkeley, 148 Cal.App. 2d 614, 307 P.2d 61; Chapin v. City Commission, 149 Cal.App.2d 40, 307 P. 2d 657.