257 1999 v. 257 1999 v. Wd56691

• Decision Date: 28 December 1999
• Citation: 8 S.W.3d 257
• Parties: 8 S.W.3d 257 (Mo.App. W.D. 1999) This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court. Fraternal Order of Police Lodge #2, Ed Wilson, Ron Fisher, and Kerry Klein, Appellants, v. City of St. Joseph, and St. Joseph Police Pension Board of Trustees, Respondents. WD56691 Missouri Court of Appeals Western District Handdown Date:
• Court: Missouri Court of Appeals

8 S.W.3d 257 (Mo.App. W.D. 1999)

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.

Fraternal Order of Police Lodge #2, Ed Wilson, Ron Fisher, and Kerry Klein, Appellants v City of St. Joseph, and St. Joseph Police Pension Board of Trustees, Respondents.

WD56691

Missouri Court of Appeals Western District

Handdown Date: 12/28/99

Appeal From: Circuit Court of Buchanan County, Hon. James William Roberts

Counsel for Appellant: George Scott Murray III

Counsel for Respondent: Jackie Dale Hendrix and Therese Marie Schuele

Opinion Summary:

Fraternal Order of Police and three individual city police officers (FOP) appeal the trial court's declaratory judgment in favor of the St. Joseph Police Pension Board of Trustees (Pension Board) and the summary judgment entered in favor of the City of St. Joseph (the City). At issue is the Pension Board's decision to change its policy of including lump sum payments for accrued paid overtime and vacation pay in the calculation of retired officers' monthly pension amounts. Under the new policy, accrued but unpaid overtime and vacation pay would be prorated over the time it was earned even if paid in a lump sum during the pension-benefit calculation period.

AFFIRMED.

Division III holds:

(1) The City was not a first class city but was instead a constitutional charter city empowered by the Missouri Constitution to enact or repeal ordinances governing its police pension plan. The City's adoption by ordinance of the language of the statutes applicable to first class cities did not convert the ordinance to statutory status to restrict the city's ability to alter or rescind its ordinance. Accordingly, the statutory prohibition on reducing retirement benefits in section 86.549.3 is inapplicable to the City.

(2) FOP failed to show affirmative misconduct by the Pension Board. The Pension Board cannot be equitably estopped from changing the method of calculating pension amounts.

(3) As there is nothing in the ordinances or pension plan or statutes applicable to the City that creates a right to have a certain method of calculating pension amounts continued, employees have no vested contractual right to the continuation of a certain method of calculating pension amounts.

(4) The City explicitly divested itself of significant control of the management of the pension plan to the Pension Board. The Pension Board did not abuse its discretion by relying on a plan actuarial study which differed from FOP's expert's conclusions and changing the method of calculating pension amounts. The Pension Board is a board of a political subdivision of the state and is, thus, excluded from the section 536.010 definition of "state agency." Therefore, the Pension Board did not abuse its discretion by failing to follow section 536.021 rule-making procedures.

(5) The Pension Board had the power to act independently of the City's control. None of the City's police pension plans had ever addressed the issue of how lump-sum vacation or overtime payments should affect the calculation of pension amounts. The City's 1996 Plan was not substantially different from previous pension plans. The trial court did not err in granting summary judgment in favor of the City.

Opinion Author: Robert G. Ulrich, P.J.

Opinion Vote: The judgment of the trial court is affirmed. Smith, and Howard, JJ., concur.

Opinion:

Fraternal Order of Police and three individual city police officers, each representing a separate class of officers with different total years of service,¹ appeal the declaratory judgment of the trial court in favor of St. Joseph Police Pension Board of Trustees ("Pension Board") and the summary judgment entered by the trial court in favor of the City of St. Joseph ("St. Joseph"). Appellants sought a declaratory judgment against Pension Board and St. Joseph to determine the rights, liabilities, and obligations of the parties in regard to the change in the method used to calculate retired officers' monthly pension amounts for service as St. Joseph police officers. Appellants claim that the trial court, in its declaratory judgment in favor of the Pension Board, erred in (1) finding the change in the method of calculating monthly pension amounts did not violate section 86.549.3, RSMo 1994, which prohibits first class cities from reducing retirement benefits; (2) ruling that the Pension Board was not estopped from changing the method of calculating pension amounts; (3) finding that the officers' future benefits are an expectancy and not a contractual entitlement, and the retired police officers had no contractual right to the former pension calculation; and (4) ruling that the pension plan trustees properly exercised their discretion by adopting a new method of calculating pension amounts. Appellants further contend that the trial court erred in granting St. Joseph summary judgment by ruling that the ordinance enacted by St. Joseph did not cause the changes in the pension benefit calculation. The judgment of the trial court is affirmed.

Facts

Prior to November 1961, St. Joseph, Missouri, operated pursuant to section 72.010, RSMo (repealed 1975) as a first class city. While operating as a first class city, St. Joseph and the St. Joseph police department established the police officers' pension fund pursuant to sections 86.510-577, RSMo. St. Joseph became a constitutional charter city in 1961, and its first city charter specifically provided that " . . . existing retirement plans shall be continued . . . ." St. Joseph Charter section 7.8 (1961). In 1981, St. Joseph adopted its second charter, which included a provision that "all ordinances, regulations and resolutions in force at the time this charter takes effect , which are not inconsistent with . . . this charter, shall remain and be in force until altered, modified or repealed." St. Joseph Charter section 16.2 (1981).

For many years until July 1989, the Pension Board determined pension benefits pursuant to first class city statutes, sections 86.510-577, RSMo, even though St. Joseph was no longer a first class city. St. Joseph adopted the language of these statutes by ordinance, including section 86.549.3, RSMo 1994, which prohibited the reduction of pension retirement benefits, and section 86.540.1, RSMo 1994, which set the monthly pension benefit as "one-half the average monthly rate of salary . . . during the twelve months immediately preceding . . . retirement." Sections 86.549.3, 86.540.1, RSMo 1994. These provisions were included in the Saint Joseph Police Pension Fund Reference Manual for Board of Trustees. In 1989, St. Joseph adopted Special Ordinance 2090, which replaced sections 86.510 through 86.577, RSMo, and changed the pension benefit to forty percent of the "average monthly rate of salary . . . in the highest twelve (12) consecutive months in the 120 months preceding . . . retirement."² Thereafter, the Pension Board began the practice of including lump sum payments for earned accrued overtime (in 1991) and vacation pay (in 1994) as "salary" in the calculation of monthly pension amounts. St. Joseph also began including these lump sum payments in the calculation of both city and officer contributions to the pension plan.

In 1996, St. Joseph enacted Special Ordinance 4041 which authorized the implementation of the "City of St. Joseph, Missouri Police Pension Plan"("1996 plan") and specifically repealed all previous pension ordinances, including Special Ordinance 2090. St. Joseph's 1996 plan provided a plan benefit of forty percent of the "average of the highest twelve (12) consecutive months of the last one hundred twenty (120) consecutive months of covered employment at retirement." After St. Joseph adopted its 1996 plan, concerns over the pension plan's unfunded liability prompted the Pension Board to change its policy of including lump sum payments for accrued unpaid overtime and vacation pay in the calculation of monthly retirement pension amounts. This change effectively reduced the monthly pension amount for officers who had

received a lump sum payment for accrued unpaid overtime and vacation pay within the twelve month calculation period. Under the new policy, accrued but unpaid overtime and vacation pay was prorated over the time which it was earned, even if paid in a lump sum during the pension-benefit calculation period.

Standard of Review

The judgment of the trial court will be affirmed unless there is no substantial evidence to support it, unless it is against the weight of the evidence, unless it erroneously declares the law or unless it erroneously applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976).

I. Application of Section 86.549.3, RSMo 1994, to Charter Cities

In appellants' first point on appeal, they claim that the trial court erred in holding that section 86.549.3, RSMo 1994, which prohibits first class cities from reducing retirement benefits, does not apply to St. Joseph. Appellants contend that since St. Joseph's police pension fund was created pursuant to the "first class cities" statutes (sections 86.510-577, RSMo) when St. Joseph was a first class city, and these "first class cities" statutes were later incorporated by reference when St. Joseph become a constitutional charter city, these statutes continue to apply even though St. Joseph has since adopted ordinances which set out a different eligibility standard and formula for calculating pension benefits.

Missouri's general assembly, as authorized by article VI, section 15 of the Missouri Constitution, established four classes of cities, defining the classes of cities by population. Cities with populations equaling or exceeding the statutory amount may elect to become a city of that class. Sections 72.010-72.050, RSMo 1969. This classification scheme was organized so that "the powers of each class [are] defined by general laws so that all such municipal corporations of the same class shall...