Bilyeu v. State Emp. Retirement System

• Decision Date: 25 October 1962
• Citation: 375 P.2d 442,58 Cal.2d 618,25 Cal.Rptr. 562
• Court: California Supreme Court
• Parties: , 375 P.2d 442 John F. BILYEU, Plaintiff and Appellant, v. STATE EMPLOYEES' RETIREMENT SYSTEM, Claimant and Appellant. S. F. 20829.

Page 562

25 Cal.Rptr. 562

58 Cal.2d 618, 375 P.2d 442

John F. BILYEU, Plaintiff and Appellant, v. STATE EMPLOYEES' RETIREMENT SYSTEM, Claimant and Appellant.

S. F. 20829.

Supreme Court of California, In Bank.

Oct. 25, 1962.

Oren, McCartney & Sells, Leland M. Edman and Donald E. Oren, Fresno, for plaintiff and appellant.

Stanley Mosk, Atty. Gen., and William J. Power, Deputy Atty. Gen., for claimant and appellant.

WHITE, Justice.

Both plaintiff, John F. Bilyeu, and claimant, the State Employees' Retirement System appeal from an order of the trial court allowing the retirement system a lien against a judgment obtained by plaintiff for personal injuries caused by the negligence of a third party. The lien was allowed for benefits paid plaintiff by the retirement system, of which plaintiff is a member.

Plaintiff, a state highway patrolman, was injured in the line of duty. He commenced the instant action against the negligent tortfeasor and recovered a judgment of $62,271.11. He also applied for and received industrial disability benefits pursuant to section 4800 of the Labor Code, and the State Compensation Insurance Fund filed a claim of lien for the amount of those benefits. (See Lab.Code, § 3856.) Plaintiff further applied for and was granted a disability retirement of $253.84 per month from the retirement system. The board of administration of the retirement system filed, in the instant action, pursuant to Government Code, sections 21451 et seq., notice of lien. After judgment was obtained by plaintiff the trial court allowed both the lien filed by the State Compensation Insurance Fund in the amount of $17,670.51, and the lien of the retirement system in an amount equivalent to the sum then already paid plaintiff pursuant to his disability retirement, $5,076.80. The retirement system claims, however, that it is entitled to a lien in the amount of $52,476.06, the actuarial equivalent of the benefits for which it became obligated to pay because of plaintiff's disability retirement. Plaintiff claims that the retirement system is not entitled to a lien in any amount, or that in any event it is entitled only to a lien in a reduced amount as hereinafter appears. The propriety of the lien filed by the State Compensation Insurance Fund is conceded and has not been placed in issue.

Authority for the creation of the State Employees' Retirement Act is found in our Constitution, article IV, section 22a, which provides as follows: 'The Legislature shall have power to provide for the payment of retirement salaries to employees of the State who shall qualify therefor by service in the work of the State as provided by law. The Legislature shall have power to fix and from time to time change the requirements and conditions for retirement which shall include a minimum period of service, minimum attained age and minimum contribution of funds by such employees and such other conditions as the Legislature may prescribe, subject to the power of the Legislature to prescribe lesser requirements for retirement because of disability.'

Pursuant to the aforesaid authority vested in it the Legislature has provided for retirement by the State Employees' Retirement Law. (Gov.Code, § 20000 et seq.) It has provided for the subrogation of members' claims in section 21451, which states: 'If benefits are payable under this part because of an injury to or the death of a member and such injury or death is the proximate consequence of the act of a person other than his employer (the State or the employing contracting agency), the board may on behalf of this system recover from such person an amount which is the actuarial equivalent of the benefits which are provided by contributions of the State or contracting agency and for which this system is liable because of such injury or death.' It is provided in section 21453 of the Government Code that the proper agency, on behalf of the retirement system, may '* * * commence and prosecute actions, file liens, or intervene in court proceedings all in the same manner and to the same extent, provided in Chapter 5, Part 1, Division 4 of the Labor Code, for the state fund or employer, except that such recovery shall not be made from benefits payable under this part because of such injury or death. * * *' In section 21454 of the Government Code it is provided that 'Any amount recovered by way of subrogation by the employer, workmen's compensation insurer or this system shall be applied first to the amounts which the employer or its insurer has paid or become obligated to pay. The balance of the amount recovered shall be paid by this system to the fund out of which the compensation of the injured or deceased member was paid * * *.'

It is at once manifest that the Legislature has provided, through the enactment of these provisions, for the recovery by the retirement system of the actuarial equivalent of benefits paid and payable to plaintiff (§ 21451), for the filing of a lien or intervening in a court proceeding to recover the amount of the actuarial equivalent (§ 21453), for the disbursement of that sum first to replenish amounts already paid or for which there is an existing obligation to pay, and for the payment of the balance to the fund from which plaintiff is compensated (§ 21454). If such enactments are deemed to be valid and proper legislation, then they constitute, with other provisions, the terms of plaintiff's contract of employment with the state agency by which he was employed. (Wallace v. Fresno, 42 Cal.2d 180, 265 P.2d 884; Kern v. City of Long Beach, 29 Cal.2d 848, 179 P.2d 799; Abbott v. City of Los Angeles, 178 Cal.App.2d 204, 3 Cal.Rptr. 127.) Plaintiff has, in legal effect, agreed that the retirement system may recover the actuarial equivalent of its loss due to his disability retirement, from a judgment recovered from the third party who negligently caused plaintiff's injuries and thus imposed the burden of the disability retirement payments on the retirement system. The right of such a recovery must be deemed to have been bargained for by the retirement system and to have determined, in part, the payments which both plaintiff and his employer were required to pay into the system in order to provide the disability retirement payments. No claim is made that the right of recovery was not equitably bargained for and as a matter of contract law plaintiff cannot now be heard to complain.

Plaintiff contends, however, that the subrogation provisions deny him the equal protection of the laws and are otherwise unconstitutional. The claim of discrimination arises from the fact that the Legislature has not included all state employees, particularly legislators and judges, within a single act, but has provided for different and, plaintiff contends, more advantageous terms to such other employees. There is no constitutional requirement of uniform treatment, but only that there be a reasonable basis for each classification. In Sacramento Municipal Utility Dist. v. Pacific G. & E. Co., 20 Cal.2d 684, we said at page 693, 128 P.2d 529, at page 535: 'Wide discretion is vested in the Legislature in making the classification and every presumption is in favor of the validity of the statute; the decision of the Legislature as to what is a sufficient distinction to warrant the classification will not be overthrown by the courts unless it is palpably arbitrary and beyond rational doubt erroneous. (Citations.) A distinction in legislation is not arbitrary if any set of facts reasonably can be conceived that would sustain it.' (See also State of California, Subsequent Injuries Fund v. Ind. Acc. Com., 48 Cal.2d 365, 371, 310 P.2d 7.) Legislators and judges differ in many substantial respects from other state employees. They are constitutional officers, generally elected for relatively short terms, instead of being hired for indefinite periods with protection from arbitrary dismissal by the Civil Service Act. There is also a vast difference in the number of legislators and judges as compared to state employees generally. There is a difference in ages, and for that reason, as well as because of the nature of the work involved, the risk differs. There is a legitimate difference in the inducements which the state may or must hold out in order to obtain qualified personnel. Such distinctions and others justify differences in the amount of contribution to as well as benefits to be received from a retirement system. In any event it cannot be said that the classifications established pursuant to article IV, section 22a of the Constitution are arbitrary and therefore unconstitutional. (See Blumenthal v. Board of Medical Examiners, 57 A.C. 251, 256, 18 Cal.Rptr. 501, 368 P.2d 101; City of Walnut Creek v. Silveira, 47 Cal.2d 804, 811, 306 P.2d 453.)

Plaintiff also argues that the subrogation provisions impair the obligation of contract. But there have been no changes in the statutory provisions affecting his retirement benefits since his employment and, as we have heretofore pointed out, the employment contract provided for the very recovery which the retirement system here seeks to establish.

Plaintiff next contends that the subrogation provisions constitute an unlawful assignment of a personal cause of action arising from a tortious injury. There are policy reasons why such assignments have not, in other instances, been permitted, but there is no constitutional prohibition which would prevent the Legislature from expressing a different policy and authorizing the instant assignment to a public agency. The very authority on which plaintiff relies in support of his contention, Fifield Manor v. Finston, 54 Cal.2d 632, states at pages 639 and 640, 7 Cal.Rptr. 377, at page 381, 354 P.2d 1073, at page 1077, 78 A.L.R.2d 813: 'Plaintiff has not cited to us any case in the California courts where a right of subrogation to a cause of action for tortious injury to the person has been recognized, except in cas...