Court Opinion

ID: 9529142
Source: CourtListenerOpinion
Date Created: 2023-08-07 03:48:00.200682+00
Date Added: 2024-06-11T13:27:41.650154
License: Public Domain

Rosellini, J.
This is an action by H. D. Bakenhus, a retired policeman, and his wife to compel the city of Seattle and the board of police pension fund commissioners of that city to pay him henceforth a pension of one hundred and eighty-five dollars a month and to recover judgment for the difference between one hundred and eighty-five dollars a month and the pension of one hundred and twenty-five dollars a month which he has been paid since his retirement on August 9, 1950. We shall refer to Mr. Bakenhus as the plaintiff.
When the plaintiff became a member of the Seattle police department in 1925, chapter 39 of the Laws of 1909, p. 59, as amended to that year (Rem. Comp. Stat., §§ 9579-9592, and Rem. Comp. Stat. (Sup.), § 9581), and particularly §4 thereof as amended (Rem. Comp Stat., § 9582), provided that a member of the police department was eligible to retire on a pension after twenty years service if he had attained age sixty or after twenty-five years service if he had not reached that age. The pension was equal to one half the salary attached to the rank held by him for the year next preceding his retirement. The members’ contributions to the pension fund were (and are) made by compulsory, nonrefundable deductions from their salaries. At that time, *697the contribution amounted to 1.5 per cent of their salaries. (In 1929 it was increased to 2 per cent.)
The plaintiff became a police captain January 1, 1943, and retained that status until he retired August 9,1950. For the year before his retirement his salary was three hundred and seventy dollars a month.
The board of trustees of the police relief and pension fund, in authorizing the pension of one hundred and twenty-five dollars a month, allowed the maximum fixed by § 1 of chapter 24, Laws of 1937, p. 62 (Rem. Rev. Stat. (Sup.), § 9582), which amended the police relief and pension fund law by, inter alia, adding the following provisos:
“Provided, That no monthly pension allowed any member of the police department of any city which may be subject to the provisions of this act, shall exceed the amount of one hundred twenty-five ($125.00) dollars per month; Provided, further, That the auditor, city comptroller or officer whose duty it is to draw warrants, in making out warrants for the monthly salaries shall not deduct or withhold any part or percentage from any members’ salary in excess of the amount deducted or withheld from the maximum salary rate on which the amount not exceeding one hundred twenty-five ($125.00) dollars the monthly pension is based.”
The plaintiff obtained a judgment directing that he be paid a pension of one hundred eighty-five dollars a month, and also judgment for two thousand eight hundred and eighty dollars, that being the difference between the pension he had been paid from the date of his retirement to the date of the trial and the amount he would have received had he been paid at the rate of one hundred eighty-five dollars a month during that period. The defendants appeal.
It is the position of the plaintiff and the view adopted by the trial court that the first proviso heretofore quoted from the 1937 amendment impaired the obligation of Mr. Bakenhus’ contract with the city and the pension fund board and is void as to him (and all who became members of the police department prior to the 1937 enactment).
The defendants contend that, under the rule adopted by the majority of courts in this country, the existence of legislation making pension and retirement provisions for mem*698bers of a police department and the acceptance or retention of employment does not establish a contract between the employee and the city; and that until the employee has fulfilled all of the conditions necessary to entitled him to a pension, he has acquired no vested right which can be impaired by intervening legislative changes in the pension system.
The plaintiff concedes that this is the majority rule, but urges that the modern trend is otherwise and more in accord with reason and justice. He relies particularly on a number of cases decided by the courts of California.
In this state, a pension granted to a public employee is not a gratuity but is deferred compensation for services rendered. The contractual nature of the obligation to pay a pension when the employee has fulfilled all of the prescribed conditions was recognized in Luellen v. Aberdeen, 20 Wn. (2d) 594, 148 P. (2d) 849 (1944), in Benedict v. Board of Police Pension Fund Com’rs, 35 Wn. (2d) 465, 214 P. (2d) 171, 27 A. L. R. (2d) 992 (1950), and in Ayers v. Tacoma, 6 Wn. (2d) 545, 108 P. (2d) 348 (1940). Had we held in those cases, or were we to hold now, that the pension statutes provide for the payment of gratuities, we would be bound to hold further that such statutes are contrary to the provisions of Art. II, § 25, and Art. VIII, § 7, of the Washington constitution and are therefore void.
For this reason, the cases from those jurisdictions which follow the so-called majority rule cannot be persuasive here, for, as was pointed out in Kern v. Long Beach, 29 Cal. (2d) 848, 179 P. (2d) 799 (1947), they were apparently decided under different constitutional provisions. The constitution of California, like that of this state, forbids the giving away of public funds; and in that jurisdiction, the rule is stated as follows:
“A pension is a gratuity only where it is granted for services previously rendered which at the time they were rendered gave rise to no legal obligation. . . . But where, ... as here, services are rendered under such a pension statute, the pension provisions become a part of the contemplated compensation for those services and so in a sense a part of the contract of employment itself.” O’Dea *699v. Cook, 176 Cal. 659, 169 Pac. 366, quoted in Kern v. Long Beach, supra.
In Holt v. Board of Police & Fire Pension Com’rs, 86 Cal. App. (2d) 714, 196 P. (2d) 94, a policeman who had become disabled and resigned before applying for his pension was held to be entitled nevertheless to the benefits of the pension plan. In the course of its opinion, the court said:
“The pension provisions of the city charter are an integral portion of the contemplated compensation set forth in the contract of employment between the city and members of the police department, and are an inseparable part of that contract. Also, the right to a pension becomes vested upon the acceptance of such employment by an applicant. (Dryden v. Board of Pension Commissioners, 6 Cal. 2d 575, 579 [59 P. 2d 104].)”
City firemen and policemen who were appointed before the effective date of a statutory amendment changing pension rates and terms, were held to be unaffected by that amendment in Bowen v. Los Angeles, 118 Cal. App. (2d) 297, 257 P. (2d) 672, the court saying:
“Pension rights, such as those here involved, are contractual in nature and they become vested at the time the employee enters the public service.”
Similarly, in Baker v. Retirement Board of Allegheny County, 374 Pa. 165, 97 A. (2d) 231, a legislative change was declared inapplicable to employees who were hired before the enactment. The statutory amendment provided that no person who, at the time of employment as a county employee, was receiving or eligible to receive a retirement allowance from the commonwealth or any • political subdivision thereof, should be eligible to receive retirement allowance from the county retirement system. Speaking of the employee whose employment began prior to the enactment of this provision, the court said:
“As of the time he joined the fund, his right to continued membership therein, under the same rules and regulations existing at the time of his employment, was complete and vested. The legislature could not thereafter constitutionally alter the provisions of his already existing contract of membership. His rights in the fund could only be changed by *700mutual consent: Marshall v. Pilots Assn., 208 Pa. 182, 55 A. 916.”
In New York the court has declared:
“Pension annuities . . . are in the nature of compensation for the services previously rendered for which full and adequate compensation was not received at the time of the rendition of such services. They are in effect pay withheld to induce long-continued and faithful service.” Giannettino v. McGoldrick, 295 N. Y. 208, 66 N. E. (2d) 57.
This view is in accord with reason and justice and, as pointed out above, has already been recognized in this state. The problem arises in determining the extent of the contractual undertaking on the part of the state or municipal authority which has promised the pension. There are cases which hold that, since the right to receive a pension does not arise until all the conditions are fulfilled, the employee’s rights must depend upon the law as it exists at that time. This view is insupportable. Unless the services are rendered in reliance on an offer, they are consideration for nothing, and any pension received thereafter can only be a gratuity. The promise on which the employee relies is that which is made at the time he enters employment; and the obligation of the employer is based upon this promise.
The contention is made that the employee waived his rights under the contract or consented to a modification by accepting salary advances beyond twice the amount of the maximum pension allowed under the 1937 statute ($125), and by not objecting to the deduction of contributions based upon that maximum pension. A similar contention was flatly rejected in Atlanta v. Anglin, 209 Ga. 170, 71 S. E. (2d) 419, a suit for a declaratory judgment brought by the city against certain retired firemen, wherein the court was asked to declare pension statutes enacted in 1924 and 1931 unconstitutional. The complaint alleged that the firemen had been paid pensions in accordance with a 1945 amendment to the pension statute, which provided for pensions not to exceed one hundred dollars per month, but had applied for an increase in the amount of their pensions based upon the provisions of the 1924 and 1931 acts.
*701The court held that these earlier acts were constitutional; that the firemen had acquired the right to be paid pensions in accordance with the provisions of these statutes; and that they were not estopped to assert this right by their conduct in not objecting to reduced deductions from their pay and in accepting benefits under the later amendments to the statutes, since both parties had equal knowledge or means of obtaining the truth, and the city was not misled. The amending acts of 1935 and 1945, decreasing the maximum pensions payable, were held to violate the contract clause of the state constitution. In the instant case, there is no evidence that the plaintiff received benefits under the 1937 act other than the reduced pension; and it is not suggested that he could have made an effective objection to the amount of contributions deducted from his salary.
The acceptance of the doctrine of waiver or estoppel would present numerous practical difficulties, which are unnecessary under the theory adopted by the California courts and others which follow the more enlightened trend.
This view, while it may not be flawless in a purely legalistic sense, gives effect to the reasonable expectations of the employee and at the same time allows the legislature the freedom necessary to improve the pension system and adapt it to changing economic conditions. Under the rule followed there, and the rule which we adopt here, the employee who accepts a job to which a pension plan is applicable contracts for a substantial pension and is entitled to receive the same when he has fulfilled the prescribed conditions. His pension rights may be modified prior to retirement, but only for the purpose of keeping the pension system flexible and maintaining its integrity. The doctrine was most recently stated in the consolidated cases of Allen v. Long Beach and Alger v. Long Beach, 45 Cal. (2d) 128, 287 P. (2d) 765 (1955), as follows:
“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 *702must be reasonable, and it is for the courts to determine upon the facts of each case 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. [Citing cases.]”
It was held in these cases that an increase in the amount of an employee’s contribution without a corresponding increase in benefit payments was unreasonable. The court further held, and here the holding is even more in point, that a change in method of computing benefits which rendered the system less flexible was disadvantageous to the employee and unjustified under any showing made by the city. There the previous system had provided that pension benefits would be payable on a fluctuating basis — one half of the salary currently attached to the position which the employee had held one year prior to his retirement. The subsequently adopted system provided for the payment of a flat amount — one half the average monthly salary earned by the employee during the five years preceding his retirement or death.
The situation here is much the same. Under the system provided by law at the time the respondent entered his employment, he was entitled to receive one half of the salary which he received during the last year before his retirement. While this system is not as flexible as that which the California court favored, it is certainly more flexible than the system adopted by the 1937 legislature, which limited the total amount payable to a pensioner to one hundred twenty-five dollars per month. At that time, it was one half the top salary paid to a police captain. Had a captain’s salary been decreased in the succeeding years, the pensioner would receive less than the maximum, but with the increase which inevitably accompanied the inflation years, he received no corresponding increase in benefits.
The appellants have not shown wherein this arbitrary limitation was justified. It is true that other benefits were *703added under the 1937 act, but they are not the benefits to which the respondent has become entitled by fulfilling the conditions necessary to receive a retirement pension. Approximately one third of the anticipated pension has been removed with no corresponding benefit, and no showing by the appellants that the reduction was necessary to preserve and perfect the system, nor that it bore any reasonable relation to the purposes of the pension plan.
The respondent has complied with the provisions of his contract. He has given twenty-five years of faithful service, during which time he turned down many other opportunities for employment; and, in the meantime, these opportunities necessarily have diminished. Until he had established his right to receive a pension by fulfilling the conditions, he could show no injury to himself by subsequent legislative changes and consequently could not complain. By waiting until those conditions were fulfilled, he has not lost his right to assert that he has been deprived of his rights by that legislation.
The judgment is affirmed.
Mallery, Schwellenbach, Donworth, Finley, Weaver, and Ott, JJ., concur.