Bakenhus v. City of Seattle

• Decision Date: 19 April 1956
• Docket Number: No. 33406,33406
• Citation: 48 Wn.2d 695,296 P.2d 536
• Parties: H. D. BAKENHUS and Lottie M. Bakenhus, his wife, Respondents, v. The CITY OF SEATTLE, a municipal corporation, and Allan Pomeroy, W. C. Thomas, G. H. Culver, David Levine, H. G. Lawrence, Arthur L. Chaffee, and Paul Sylvester, the members of and constituting the Board of Police Pension Fund Commissioners of said City of Seattle, Appellants.
• Court: Washington Supreme Court

Page 695

48 Wn.2d 695

296 P.2d 536

H. D. BAKENHUS and Lottie M. Bakenhus, his wife, Respondents, v. The CITY OF SEATTLE, a municipal corporation, and Allan Pomeroy, W. C. Thomas, G. H. Culver, David Levine, H. G Lawrence, Arthur L. Chaffee, and Paul Sylvester, the members of and constituting the Board of Police Pension Fund Commissioners of said City of Seattle, Appellants.

No. 33406.

Supreme Court of Washington, En Banc.

April 19, 1956.

A. C. Van Soelen, Glen E. Wilson, C. V. Hoard, Seattle, for appellants.

McMicken, Rupp & Schweppe, Seattle, for respondents.

B. A. Farley and Paul F. Schiffner, Spokane, W. C. Timothy, Sumner, Elwood Hutcheson, Yakima, John C. Tuttle, Walla Walla, Richard G. Patrick, Pasco, C. M. Boyle and Marshall McCormick, Tacoma, Omar S. Parker, Hoquiam, Lester T. Parker, Aberdeen, O. M. Nelson, Montesano, Kenneth W. Hill, Raymond, D. D. Schnatterly, Centralia, Leslie R. Cooper, Everett, Arthur L. Haugan, Renton, W. V. Wells, Anacortes, Roy A. Holland, Bremerton, Kenneth A. Cole, Seattle, amici curiae.

ROSELLINI, Justice.

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 ciyt to pay him henceforth a pension of $185 a month and to recover judgment for the difference between $185 a month and the pension of $125 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 the 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 $370 a month.

The board of trustees of the police relief and pension fund, in authorizing the pension of $125 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 $185 a month, and also judgment for $2,880, 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 $185 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 county, the existence of legislation making pension and retirement provisions for members 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 entitle 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. City of Aberdeen, 1944, 20 Wash.2d 594, 148 P.2d 849, in Benedict v. Board of Police Pension Fund Commissioners of City of Seattle, 1950, 35 Wash.2d 465, 214 P.2d 171, 27 A.L.R.2d 992, and in Ayers v. City of Tacoma, 1940, 6 Wash.2d 545, 108 P.2d 348. 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. City of Long Beach, 1947, 29 Cal.2d 848, 179 P.2d 799, 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, 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'Deal v. Cook, 176 Cal. 659, 169 P. 366, 367 quoted in Kern v. City of Long Beach, supra.

In Holt v. Board of Police and Fire Pension Commissioners of City of Long Beach, 86 Cal.App.2d 714, 196 P.2d 94, 96 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. City of Los Angeles, 118 Cal.App.2d 297, 257 P.2d 672, 673, 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, 233, 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 mutual consent. Marshall v. Pilots' Ass'n, 206 Pa. 182, 55 A. 916, 917.'

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, 59.

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...