Axelson v. Minneapolis Teachers' Retirement Fund Ass'n

Decision Date08 March 1996
Docket NumberNo. C8-94-2153,C8-94-2153
Citation544 N.W.2d 297
Parties108 Ed. Law Rep. 1255 Richard J. AXELSON, Respondent, v. MINNEAPOLIS TEACHERS' RETIREMENT FUND ASSOCIATION, et al., Petitioners, Appellants.
CourtMinnesota Supreme Court

Syllabus by the Court

1. Board of trustees of retirement fund association does not have discretionary authority to permit a member to purchase retirement service credits for years in which member was on leave of absence where neither the authorizing statute nor the plan documents at the time of the leave provided for such purchase.

2. Board of trustees of retirement fund association does not have discretionary authority to apply an amendment to the association's articles of incorporation retroactively where there is no indication that the amendment was intended to have retroactive effect.

3. Doctrine of promissory estoppel does not apply where the promise of the board of trustees of retirement fund association was made without authority.

Review of Court of Appeals.

Robert D. Butterbrodt, St. Paul, for appellant.

Roger A. Peterson, Therese Dosch Anderson, Minneapolis, for respondent.

Heard, considered, and decided by the court en banc.

OPINION

PAGE, Justice.

We are called upon to determine whether the board of trustees of a public pension plan has the discretionary authority to permit a plan member to purchase retirement service credits for years when the member was on leave of absence and the applicable plan documents do not provide for such a purchase. Richard J. Axelson was a teacher employed by the Minneapolis Public Schools Special School District No. 1 (District) from September 1959 until his retirement in June 1994. Axelson was granted two 1-year leaves of absence from his teaching duties to serve as a Peace Corps volunteer, teaching English in Brazil during the 1966-67 and 1967-68 school years. During each of his years as a teacher in the district, Axelson was a member of the Minneapolis Teachers Retirement Fund Association (MTRFA), the public pension plan that covers teachers in the Minneapolis public schools. While Axelson was on leave, no pension contributions were made on his behalf.

On March 30, 1974, Axelson wrote a letter to the MTRFA, inquiring as to whether he could purchase retirement service credits for the 1966-67 and 1967-68 leaves. The MTRFA responded, "Credit for Leaves of this type is allowed under certain circumstances, but must be approved by the Board of Trustees." The MTRFA Board approved Axelson's request to purchase the retirement service credits on May 15, 1974, and at the same time informed him that he needed to pay $2,870.36 on or before December 31, 1974, or "an additional amount will be due for interest." The record does not reflect the Board's rationale for granting Axelson's request. In December of 1974, Axelson telephoned the MTRFA and asked if the payment had to be made by December 31 to purchase the retirement service credits. He was informed that payment was not necessary by December 31. He was also informed that if payment was not made by that date, $2,999.52 would be due on or before December 31, 1975. Finally, he was informed that if payment was not made by December 31, 1975, interest would continue to accrue until the payment was made.

Axelson took no further action until 1990, when he advised the MTRFA that he wanted to purchase the retirement credits. After obtaining legal advice, the MTRFA informed him that its "laws do NOT have any provision which would allow [him] to make payment and obtain teaching service credit for this time." (Emphasis in original.) In response, Axelson did nothing until 1993 when he requested that the MTRFA provide a current calculation of the amount he needed to pay to purchase the retirement service credits. At that time, the MTRFA reminded Axelson of the position it took in 1990 and indicated that the MTRFA had never had the authority to grant retirement service credits for his leaves of absence. Axelson retired on June 30, 1994. 1 In a letter to Axelson dated August 24, 1994, the MTRFA informed Axelson that its Board's decision to disapprove his request to purchase the retirement service credits was final.

Maintaining that he would have purchased the retirement service credits in 1974 if the MTRFA had not represented to him that he could purchase the credits at a later date, Axelson challenged the Board's decision by writ of certiorari to the court of appeals, arguing that the MTRFA was estopped from denying him the right to purchase the retirement service credits. The court of appeals, agreeing with Axelson, determined that the 1974 MTRFA Board had the authority to grant Axelson's request to purchase the retirement service credits and that the doctrine of promissory estoppel prevented the MTRFA from denying Axelson the right to purchase the retirement service credits. Axelson v. Minneapolis Teachers' Retirement Fund Ass'n, 532 N.W.2d 594, 597-98 (Minn.App.1995).

The MTRFA's appeal presents three issues for our review:

(1) Did the 1974 MTRFA Board have the authority to grant Axelson's request to purchase the retirement service credits?

(2) Was the 1994 MTRFA Board estopped from denying Axelson's request to purchase the retirement service credits?

(3) If Axelson is entitled to purchase the retirement credits, what interest rate should be applied in calculating the amount required to purchase the retirement service credits?

On the record before us, we conclude that the 1974 MTRFA Board lacked the authority to grant Axelson's request to purchase the retirement service credits. Therefore, we reverse the court of appeals and reinstate the decision of the 1994 MTRFA Board.

A quasi-judicial decision of an agency that does not have statewide jurisdiction will be reversed if the decision is "fraudulent, arbitrary, unreasonable, unsupported by substantial evidence, not within its jurisdiction, or based on an error of law." See Dokmo v. Independent Sch. Dist. No. 11, 459 N.W.2d 671, 675 (Minn.1990). We have analogized a public retirement fund board to an administrative agency. Fassbinder v. Minneapolis Fire Dep't Relief Ass'n, 254 N.W.2d 363, 368 (Minn.1977).

Axelson's claim to the retirement service credits is based on the doctrine of promissory estoppel, which implies a contract where the promisor makes a unilateral or otherwise unenforceable promise and the promisee relies on the promise to his or her detriment. Christensen v. Minneapolis Mun. Employees Retirement Bd., 331 N.W.2d 740, 748 (Minn.1983) (holding that the protectable right of a public employee to an offered pension is determined by applying promissory estoppel). This court has held, however, that "[w]here an agency has no authority to act, agency action cannot be made effective by estoppel." 2 Senior Citizens Coalition v. Minnesota Pub. Utils., 355 N.W.2d 295, 304 (Minn.1984); see also Spaulding v. Board of County Comm'rs, 306 Minn. 512, 515, 238 N.W.2d 602, 604 (1976) (county cannot be bound by estoppel to make unauthorized payments to county officer where sick leave policy covers only county employees); Board of Educ. v. Sand, 227 Minn. 202, 211, 34 N.W.2d 689, 695 (1948) ("[e]stoppel cannot be invoked to confer upon a political subdivision of the state governmental power otherwise lacking").

Therefore, to resolve this case, the threshold issue we must address is whether the 1974 MTRFA Board, under either its general discretionary authority to determine benefits or by retroactive application of an amendment to the MTRFA Articles of Incorporation (articles), had the authority to approve Axelson's request to purchase retirement service credits for the 1966-67 and 1967-68 school years. We conclude that the 1974 MTRFA Board did not have the authority to approve Axelson's request to purchase the retirement service credits.

The MTRFA was created in 1909 "to serve as the fiduciary for retirement funds for teachers employed by the Minneapolis Board of Education." Minneapolis Teachers Retirement Fund Ass'n, v. State, 490 N.W.2d 124, 125 (Minn.App.1992). At the time that Axelson made his inquiry about purchasing the retirement service credits in 1993, the MTRFA was organized under the Minnesota Nonprofit Corporation Act, Minn.Stat. ch. 317A, and was governed by chapter 354A, portions of chapter 356, as well as chapter 356A. The MTRFA is managed by a seven-member board of trustees. The documents that comprise the MTRFA's pension plan include the association's articles, bylaws, and the applicable statutes.

The MTRFA Board is required to carry out its duties in accordance with the law and the plan documents, Minn.Stat. § 356A.05(b) (1994), and owes a fiduciary duty to:

(1) the active, deferred, and retired members of the plan, who are its beneficiaries;

(2) the taxpayers of the state or political subdivision, who help to finance the plan; and

(3) the state of Minnesota, which established the plan.

Minn.Stat. § 356A.04, subd. 1 (1994). The MTRFA Board members, in the exercise of their fiduciary duties, are held to a prudent person standard, requiring them to "exercise that degree of judgment and care, under the circumstances then prevailing, that persons of prudence, discretion, and intelligence would exercise in the management of their own affairs." Minn.Stat. § 356A.04, subd. 2 (1994).

It is well settled that "the law in force when the claim to a pension arises governs the right to the pension." Butler v. Minneapolis Police Relief Ass'n, 283 Minn. 70, 72, 166 N.W.2d 705, 706 (1969) (quoting State ex rel. Krake v. Minneapolis Fire Dep't Relief Ass'n, 205...

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