PACKER v. BOARD OF RETIREMENT OF LOS ANGELES COUNTY PEACE OFFICERS RETIREMENT SYSTEM

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District Court of Appeal, Second District, Division 3, California.

PACKER v. BOARD OF RETIREMENT OF LOS ANGELES COUNTY PEACE OFFICERS' RETIREMENT SYSTEM et al.

Civ. 16480.

Decided: March 17, 1949

Gordon M. Snyder, of Los Angeles, for appellant. Harold W. Kennedy, Co. Counsel, and Edward H. Gaylord, Deputy Co. Counsel, both of Los Angeles, for respondents.

This is an appeal from a judgment dismissing appellant's petition for a writ of mandate after respondents' general demurrer thereto had been sustained without leave to amend. Appellant, as the widow of Glen J. Packer, formerly a Los Angeles County Deputy Sheriff, brought the action to compel the payment to her of a widow's pension in the sum of $75 per month, pursuant to the provisions of section 11 of the County Peace Officers' Retirement Law as amended in 1937.

The following facts are disclosed by the petition: Appellant married Glen J. Packer in 1905 and thereafter was at all times his wife until his death in 1947. She has not remarried. Mr. Parker was employed as a Deputy Sheriff of Los Angeles County for some 20 years prior to July 27, 1946, at which time he was retired for length of service at the age of 63 years. The County Peace Officers' Retirement Law was enacted in 1931, Stats.1931, Ch. 268, p. 477; Deering's Gen.Laws, Act 5848, and in 1934 pursuant to its terms was adopted and accepted by the Los Angeles County Board of Supervisors. From that time until his retirement Mr. Packer made all the required contributions to the retirement fund from his salary and, until his death, was a member of the Los Angeles County Peace Officers' Retirement System.

In 1937, section 11 of the retirement law was amended to provide for pension payments to widows of members in specified cases. As amended, the provisions of section 11, material to the present appeal, read: “Whenever any member shall be killed, or die * after retirement * then an annual pension shall be paid in equal monthly installments to his widow * in the sum of $75 per month. Said pension shall be paid to the widow during her lifetime or until she remarries * provided, however, that no widow of a pensioner shall be entitled to a pension unless she shall have been married to such deceased pensioner at least five years prior to the date of his retirement.” The petition alleges that the objective of this amendment was to induce competent persons to enter and remain in public employment; that by reason of the amendment petitioner's husband was induced to retain his employment as a deputy sheriff from 1937 to the time of his retirement; that after the amendment he made all his salary contributions to the pension fund and performed his official duties in reliance upon the benefits and protection afforded to his wife thereby; and that he would not have remained in the service and would not have made his contributions to the pension fund had he not believed and relied upon the contract of the county and the respondent retirement board to pay to his wife a widow's pension pursuant to the amendment.

After Mr. Packer's death appellant twice applied to the respondent retirement board for a pension pursuant to section 11 as thus amended. Although the funds of the retirement system were then and have been at all times since sufficient to pay appellant all payments claimed to be due her, both applications were denied. No reasons were stated by the board for the denial of the first application. The second, however, was denied upon the ground that by reason of the subsequent amendment of section 11 together with the addition of section 11.5, by Statutes of 1941, Ch. 745, she was not entitled to a widow's pension. The amendment to section 11 added the words “for service connected disability,” so that the provisions here involved read: “Whenever any member shall be killed, or die, * after retirement for service connected disability, an annual pension shall be paid in equal monthly installments to his widow, *” etc. The section was further amended in other particulars immaterial here. The newly added provisions of section 11.5 read: “Pension options: Election of member. At any time before the first payment on account of any pension is made, or within 60 days after the effective date of this section, a member or beneficiary may elect to receive the actuarial equivalent at that time of his pension in a lesser pension payable throughout his life and that of his widow, if she survives him, in accordance with one or the other of the following options: Option 1: Upon his death, such lesser pension shall be continued throughout the life of and paid to his widow. Option 2: Upon his death one-half of such lesser pension shall be continued throughout the life of and paid to his widow.”

The ultimate question presented for decision is whether the 1941 amendments of the retirement law, when considered as an attempt to deprive appellant of the widow's pension to which she was otherwise entitled, constitute an impairment of a contracual obligation of the county in violation of Article 1, sections 13 and 16, of the Constitution of the State of California, and of Article 1, section 10, and the Fourteenth Amendment of the Constitution of the United States. Appellant contends that she has a vested right to a pension separate from the one granted to Mr. Packer and that the legislature has attempted to deprive her of that right. Respondent answers that there was but a single pension provided for, that the right belonged exclusively to the husband, and that the effect of the 1941 amendments was merely to reduce the amount of his pension.

We have reached the following conclusions: (1) Mr. Packer's services as a peace officer subsequent to the 1937 amendment created a contractual obligation of the county to provide a pension for his widow; (2) this obligation ran in favor of Mrs. Packer as a third party beneficiary; (3) it was an obligation distinct from the county's obligation to Mr. Packer; and (4) Mrs. Packer could not constitutionally be deprived of her right to the pension. The single conclusion which controls all the others is that there were separate and distinct rights in the husband and in the wife. The identical question has not been decided in California, nor so far as we know, in any other jurisdiction. However, under all the authorities, if Mrs. Packer did acquire a vested right to a pension prior to 1941, she could not be deprived of it entirely.

The questions we have been called upon to answer are of major importance to the peace officers and their wives. If Mrs. Packer has been constitutionally deprived of her widow's pension it would be competent also for the legislature to abolish the widows' pensions which were not disturbed by the 1941 amendment.

Public pension statutes have provided a fertile source for litigation, and the nature of the rights which they confer has been considered in many reported cases. Contrary to the view prevailing in some states (see, 54 A.L.R. 943, 98 A.L.R. 505, 112 A.L.R. 1009, 137 A.L.R. 249), it is well settled in California that pensions for public employees are not mere gratuities which may be withdrawn at will. The provisions of section 31 of Article IV of the Constitution, forbidding gifts of public money to private individuals, which would otherwise invalidate most if not all of our pension statutes have been held to be inapplicable upon the ground that “a pension is a gratuity only where it is granted for services previously rendered, and 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 v. Cook, 176 Cal. 659, 661, 662, 169 P. 366, 367, quoted with approval in Kern v. City of Long Beach, 29 Cal.2d 848, 851, 179 P.2d 709; Gibson v. City of San Diego, 25 Cal.2d 930, 937, 156 P.2d 737, and Riggs v. District Retirement Bd., 21 Cal.2d 382, 385, 132 P.2d 1. See, also, Snyder v. City of Alameda, 58 Cal.App.2d 517, 519, 136 P.2d 857; Douglas v. Pension Bd., 75 Cal.App. 335, 340, 242 P. 756. By the same token, statutes providing pensions for employees' widows have been uniformly recognized to be valid upon the theory that they too are a part of the prospective delayed compensation of the officer for services previously rendered by him. See, Sweesy v. Los Angeles etc. Retirement Bd., 17 Cal.2d 356, 359–361, 110 P.2d 37, and cases cited. However, the mere fact that the widow's pension is treated as part of the officer's compensation under his employment contract for the purpose of determining whether or not it is a gratuity, does not necessarily mean that her pension is not a separate and distinct contractual obligation of the county, nor does it require the conclusion that her pension rights can be entirely destroyed so long as those of her husband are left substantially unimpaired.

Various considerations lead irresistibly to the conclusion that the two pensions were intended to be, and should be, treated as separate and distinct contractual obligations of the county, springing, however, from the same consideration, and that each is separately protected from legislative impairment by constitutional provision. The 1937 Act created the widow's pension as a new, distinct, and additional benefit to peace officers. Unlike the employee's pension, the amount was fixed by law at $75 per month, irrespective of the amount of the officer's terminal salary or pension; and the existing pension rights of peace officers were in no way affected by the supplemental pension which was provided for their widows. Upon the face of the 1937 Act, it appears that there was no necessary relationship between the two pensions. Moreover, in respect to the time for commencement of payments, the two pension rights are consecutive rather than concurrent. No installments are payable to the widow until after the termination of all pension payments to the husband, due to his death. Any question as to the enforceability of the widow's pension rights ordinarily could not arise until after her husband's death; and thus, although her pension is clearly an indirect benefit to her husband, it cannot be logically treated as a component or integral part of his pension. We attach controlling significance, however, to the fact that although appellant was not a party to her husband's employment contract (see Loveland v. City of Oakland, 69 Cal.App.2d 399, 401, 159 P.2d 70), she was, in respect to her pension, a third party beneficiary of that contract entitled to separately enforce her right thereunder prior to rescission by the parties. Civ.Code, § 1559; Garratt v. Baker, 5 Cal.2d 745, 748, 56 P.2d 225. That her right was a binding contractual obligation of the county, although subject to conditions subsequent, is implicit in the theory upon which a third party beneficiary is permitted to enforce a contract, namely, that the law immediately operates upon the acts of the contracting parties, creating a duty and establishing the essential of privity of contract as between the promisor and the third person. Sherwood & Sherwood v. Gill & Lutz, 36 Cal.App. 707, 711, 173 P. 171; Tweeddale v. Tweeddale, 116 Wis. 517, 93 N.W. 440, 61 L.R.A. 509, 96 Am.St.Rep. 1003; 12 Am.Jur. sec. 278, p. 830; anno. 81 A.L.R. 1284. See also, Corbin, Contracts For the Benefit of Third Persons, 27 Yale L.J. 1008, 1020. It has been stated that “while such a contract remains unrescinded, the relations of the parties are the same as though the promise had been made directly to the third party.” J.F. Hall–Martin Co. v. Hughes, 18 Cal.App. 513, 516, 123 P. 617. Thus, the pension contract could not be unilaterally rescinded or revoked by the county so as to deprive appellant of her pension as long as her husband continued to render the consideration therefor by performing his duties and making his salary contributions. Malone v. Crescent City M. & T. Co., 77 Cal. 38, 44, 18 P. 858; Pitzer v. Wedel, 73 Cal.App.2d 86, 90, 165 P.2d 971; 6 Cal.Jur. 472. Any other view would be inconsistent with the settled rule that the cause of action of the third person springs directly from the contract at the same time as that of the original promisee. Bogart v. George K. Porter Co., 193 Cal. 197, 223 P. 959, 31 A.L.R. 1045. We conclude that appellant's right to a pension as a third party beneficiary was in legal contemplation a separate and distinct one arising out of the contract at the same time and with the same effect as her husband's right, for which he had admittedly contracted, to have her receive a pension as provided by the 1937 statute, in addition to the pension payable to him.

All controversy upon the question of when the officer's pension right sufficiently partakes of a contractual status so as to be within the scope of constitutional protection has been laid to rest by the recent decision in Kern v. City of Long Beach, supra, 29 Cal.2d 848, 179 P.2d 799. In that case it was definitely settled that the right of a public employee to a pension becomes a vested one upon acceptance of employment and performance of substantial services thereunder. See, also, Dryden v. Board of Pension Commrs., 6 Cal.2d 575, 579, 59 P.2d 104; French v. French, 17 Cal.2d 775, 777, 112 P.2d 235, 134 A.L.R. 366; Aitkens v. Roche, 48 Cal.App. 753, 755, 192 P. 464. The court unanimously held that by repealing the pension provisions of its charter in respect to employees not yet eligible for retirement, the City of Long Beach had impaired their vested contractual rights to a pension. Furthermore, in giving express recognition to the fact that a number of earlier cases including Sweesy v. Los Angeles etc. Retirement Bd., supra, and Jordan v. Retirement Board, 35 Cal.App.2d 653, 96 P.2d 973 (both of which are cited by respondent), contain dicta apparently inconsistent with its decision, the court limited the authority of those cases to their particular facts. When the holdings in the various cases are considered, apart from any language used which was unnecessary to the decisions, it becomes evident that many of the apparent inconsistencies in the opinions are due to loose usage of the word “vested” where it was not necessary for the court to distinguish between its application to the relations which cause the contractual right to a pension to vest and the subsequent conditions upon which the amount and extent of that pension right become fixed. All the earlier decisions bearing on this point were considered in the Kern case. The holding in the latter case must be deemed controlling as to the time when and the circumstances under which a contractual right to a public employee's pension vests. It follows from what we have said that petitioner's right to a pension became a vested one prior to the 1941 legislation, and that the amendments of that year could not be constitutionally invoked to impair that right. See West v. Anderson, 187 Ga. 587, 1 S.E.2d 671. We therefore find it unnecessary to consider whether appellant's position is further fortified by the fact that her pension right, having been acquired by deductions from earnings during marriage, is community property. Crossan v. Crossan, 35 Cal.App.2d 39, 94 P.2d 609; cf. Bazzell v. Endriss, 41 Cal.App.2d 463, 464, 107 P.2d 49, and cases there cited.

Still insisting that there was but a single pension right, respondent urges upon us the established rule that the amount of the pension payments is governed by the law in effect at the time when the contingency occurs which gives rise to the right to payment. Brooks v. Pension Board, 30 Cal.App.2d 118, 123, 85 P.2d 956, disability; Kavanaugh v. Board of Police Pension Fund Commrs., 134 Cal. 50, 66 P. 36, death; O'Dea v. Cook, supra, fatal injuries. Upon this basis, it is contended that the effect of the 1941 amendment to section 11 was merely to modify or reduce the amount of the member's pension, without impairing his contractual right to that pension. That some changes in amount are permissible was clearly indicated by the opinion in the Kern case, where the court said, pages 853–855 of 29 Cal.2d, page 802 of 179 P.2d: “The city relies upon cases holding that the governing body may make modifications in a pension system prior to the time for commencement of payments. It is true that there are many decisions in this state which permit modifications, but it does not follow that an employee may be deprived of all pension benefits by a repeal of the statute without the enactment of a substitute, and no decision has been found holding that an employee's pension rights may be entirely destroyed in that manner. * The ruling permitting modification of pensions is a necessary one 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 beneficient policy. The permissible scope of changes in the provisions need not be considered here, because the respondent city, with a minor exception, has repealed all pension provisions. Thus it appears, when the cases are considered together, that an employee may acquire a vested contractual right to a pension but that this right is not rigidly fixed by the specific terms of the legislation in effect during any particular period in which he serves. The statutory language is subject to the implied qualification that the governing body may make modifications and changes in the system. The employee does not have a right to any fixed or definite benefits, but only to a substantial or reasonable pension. There is no inconsistency therefore in holding that he has a vested right to a pension but that the amount, terms and conditions of the benefits may be altered.”

Upon analysis, we are of the opinion that the correct application of the foregoing principles of law requires a conclusion contrary to that urged by respondent. It is true that, although the 1941 legislation repealed the $75 per month pension for widows of peace officers who were retired for age and service, it did not otherwise affect the pension rights of the officers, and it did leave them with the same substantial and reasonable pension to which they had previously been entitled, namely, one-half of terminal salary but not to exceed $150 per month. However, the contention that the elimination of appellant's pension merely reduced the amount of her husband's pension is based upon the same fundamental misconception of the true nature of appellant's pension rights to which we have previously referred. As pointed out above, the widow's pension provided by the 1937 Act was a separate vested right, apart from that of the employee. Although it could have been modified or reduced as her husband's pension could have been modified or reduced, it could not be entirely taken away. We are satisfied that respondent's contention finds no support in the cases sustaining modifications in the amount of pension payments. Many of the cases merely hold that where the original pension law fixes the amount of pension at a specified fraction of the salary attaching to the rank held at retirement, subsequent changes in the amount of that salary may validly effect an increase or decrease in the related pension payments. Casserly v. City of Oakland, 6 Cal.2d 64, 56 P.2d 237; Carr v. Fire Commission, 30 Cal.App.2d 208, 85 P.2d 959; Jones v. Cooney, 82 Cal.App. 265, 255 P. 536; Klench v. Board of Pension Fd. Commrs., 79 Cal.App. 171, 249 P. 46; Aitken v. Roche, 48 Cal.App. 753, 192 P. 464. See also, McCarthy v. City of Oakland, 60 Cal.App.2d 546, 141 P.2d 4. The effect of other decisions is that increases in pension benefits enacted subsequent to retirement are not void as gratuities, Sweesy v. Los Angeles etc. Retirement Bd., supra; Home v. Souden, 199 Cal. 508, 250 P. 162; and that reductions in the member's pension enacted prior to his retirement are valid since the amount thereof is determined by the law in effect when the right to payment accrues. Brophy v. Employees Retirement System, 71 Cal.App.2d 455, 162 P.2d 939; Brooks v. Pension Board, 30 Cal.App.2d 118, 85 P.2d 956. None of the cited cases involved the outright elimination of an independent pension; and, as the Kern decision points out, in Pennie v. Reis, 80 Cal. 266, 22 P. 176, and other related cases which did involve a repealing statute, the legislature had simultaneously substituted a more comprehensive pension system for the one abolished, with the result that the “modification * gave the employees more pension benefits than they had before.” We conclude that the 1941 amendment to section 11, when considered as an attempt to abolish appellant's pension, is a direct impairment of the county's separate and distinct contractual obligation to appellant; and it does not constitute a mere modification in the amount of her husband's pension.

The question next presented is whether section 11.5 provides an alternative for appellant's vested pension right. The statements previously quoted from the Kern case convey a direct implication that where the outright repeal of a pension law is accompanied by the enactment of a substantial substitute, the legislation may be upheld as constituting merely a permissible modification or change in “the amount, terms and conditions of the benefits.” We need not pause to consider the possible limitations upon the doctrine, for we think it clear that the options provided by section 11.5 do not amount to a substitute. It is to be noted at the outset that the provisions of section 11.5 are in no sense mandatory but on the contrary are expressly made subject to the wishes of the retired or retiring member. There is no compulsion upon members to elect either option. Any pension payments to which appellant might be entitled under section 11.5, therefore, were conditional upon the voluntary exercise of an option by her husband, whereas the pension which had been granted by section 11, as worded prior to 1941, was fixed by law, independent of the desires or actions of her husband. Furthermore, analysis of the option provisions discloses that they are merely alternative methods for payment of the peace officer's pension as distinguished from that of his widow. The words, “actuarial equivalent at that time of his pension,” in their ordinary significance would appear to refer to the present value at the time of retirement of an annuity sufficient to meet all anticipated future pension installments at current rates of payment over the life expectancy of the member. Where either option is exercised, the amount of the monthly payments would presumably be calculated in accordance with actuarial principles by taking into consideration the life expectancy of the wife; so that, in theory, when the survivor died, the total amount which had been paid under the option would be equal to that which would have been paid to the member alone if he had not exercised either option. It would seem, therefore, that if the life expectancy of the wife were less than that of her husband, and the statistical probability of her surviving him was nil, payments under the selected option would be no different in amount from payments of a regular pension. It is manifest that by exercising either option the member is in effect merely choosing to have his accrued pension paid in a different manner from that originally contemplated. Strong support for this view is found in the fact that the options created by section 11.5 are available to and may be elected by any member of the system, including those members whose widow's pension rights were left undisturbed by the 1941 amendments. The section evidently was designed to liberalize the method of payment of accrued members' pensions by permitting them to choose from designated alternatives the distribution plan best suited to their individual financial requirements. Since it appears that there would be no impediment to, nor inconsistency in, the exercise of an option by a member whose wife was already clearly entitled to a future widow's pension (e.g. where the member was retired for service-connected disability), it is clear that section 11.5 constitutes solely an optional modification of the individual pension rights of the members, exclusive of those of their widows. Any payments which a widow might receive pursuant to the section would not be due to a pension right conferred by the Act but would be the result of her husband's allotment to her, under the option, of part of his pension. Therefore, an election by Mr. Packer of one of the options, had he made one, would only have affected the time and manner of payment of his personal pension, and would have been in no way a substitute for the separate pension payable to appellant.

We have felt impelled to decide the important questions involved upon the grounds stated in our opinion, and have therefore not decided whether the 1941 amendments were intended to affect the pension rights of widows of officers who entered the service prior to the adoption of the amendments.

The judgment is reversed.

SHINN, Presiding Justice.

WOOD and VALLEE, JJ., concur.

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