Bilyeu v. Board of Admin. of State Employee's Retirement System
| Decision Date | 12 April 1962 |
| Court | California Court of Appeals Court of Appeals |
| Parties | John F. BILYEU, Plaintiff, Respondent and Appellant, v. BOARD OF ADMINISTRATION OF the STATE EMPLOYEES' RETIREMENT SYSTEM, Lien Claimant, Appellant and Respondent. Civ. 43. |
Orgen, McCartney & Sells, Leland M. Edman, Donald E. Oren, Fresno, for respondent-appellant Bilyeu.
Stanley Mosk, Atty. Gen., William J. Power, Deputy Atty. Gen., Sacramento, for appellant-respondent Board.
Plaintiff Bilyeu was injured in line of duty as a California Highway Patrolman. The injury resulted from the negligence of third parties, against whom Bilyeu recovered a judgment for $62,271.11. Against this judgment the State Compensation Insurance Fund filed a lien for $17,670.51. The Board of Administration of the State Employees' Retirement System (for convenience referred to herein as 'System'), filed a notice of lien against the judgment for the sum of $52,476.06, the actuarial equivalent of the benefits which System became obligated to pay because of Bilyeu's disability retirement from the California Highway Patrol. The trial court disallowed the lien for the actuarial equivalent, but did allow a lien for $5,076.80, the amount actually paid Bilyeu by System at the time the lien was filed. Both Bilyeu and System have appealed.
Bilyeu first attacks the constitutionality of the subrogation provisions of the State Employees' Retirement Law upon the ground of discriminatory classification. He points out that the statutes providing state retirement systems for legislators, for judges and for teachers do not require subrogation in those instances where disability is caused by the wrongful act of a third party, while System has such rights under the provisions of the State Employees' Retirement Act.
Authority for the creation of the State Employees' Retirement Act is found in the State Constitution, article, 4, section 22a, which reads as follows:
The power thus vested in the Legislature is plenary, and there is no requirement that a single act be framed to include all employees. Indeed, to attempt to do so would be most difficult and impractical. Classification of State employees for retirement purposes according to the nature of their employment and the retirement problems peculiar thereto was left to the judgment of the Legislature. The exercise of this power, however, is restricted by the constitutional limitation that there must be a reasonable basis for each classification created. The principles governing review of an attack upon a classification created by legislative act is thoroughly presented in Sacramento M. U. Dist. v. Pacific Gas & Electric Co., 20 Cal.2d 684. At page 693, 128 P.2d 529 at page 535 the Court had this to say:
(See also State of California v. Ind. Acc. Com., 48 Cal.2d 365, 371, 310 P.2d 7.)
Applying these principles to the classifications under attack we find, first, that legislators are elected for a term of two or four years; judges are either elected or appointed, and if appointed they must stand for election for a term prescribed by law; school teachers and school administrators are hired by contract. They must measure up to certain educational standards which include continuing educational requirements. Also the teacher tenure law is peculiar to their classification. An employee, on the other hand, is hired by the State for an indefinite period and most State employees are protected from arbitrary dismissal by the State Civil Service Act. Second, it is significant that the number of employees within each classification varies greatly. We are told there are approximately 250,000 members in the employees' retirement system, 130 in the legislators' retirement system, and 609 in the judges' retirement system. Third, the risk differs with each classification because of the nature of the work performed and the average age of the employees. Risk, considered in relation to number of employees, justifies a difference in the amount of contributions by the employees and by the State, as well as a difference in benefits under each classification.
The plenary nature of article 4, section 22a of the Constitution necessarily vests in the Legislature a wide discretion to ascertain from the facts before it whether there is justification for a classification. It is not within our province to decide whether the Legislature has acted wisely in making a particular classification. (City of Walnut Creek v. Silveria, 47 Cal.2d 804, 811, 306 P.2d 453; Sacramento M. U. Dist. v. Pacific Gas & Elec. Co., supra.) Furthermore, when a classification is attacked, every presumption favors its validity. (Blumenthal v. Bd. of Medical Examiners, 57 A.C. 251, 256, 18 Cal.Rptr. 501, 368 P.2d 101; In re Herrera, 23 Cal.2d 206, 212, 143 P.2d 345; Lelande v. Lowery, 26 Cal.2d 224, 232, 234, 157 P.2d 639, 175 A.L.R. 1109; 11 Cal.Jur.2d 726.) It cannot be said that the classifications established by the Legislature pursuant to article 4, section 22a, are rooted in caprice, and unconstitutional.
Bilyeu next asserts that the subrogation provisions of the Retirement Act impair the obligation of contract. It should be pointed out, first, that there are two aspects to the retirement system: one is retirement for years of service, under which retirement payments are earned by the employee, and as to this contractual right there can be no subrogation. The other, with which we are concerned, arises from premature retirement. Our specific problem relates to premature retirement resulting from disability caused by the wrongful act of a third party. With this in mind, we turn to Bilyeu's contention that when he went to work for the State he entered into a contract implied from the provisions of the State Employees' Retirement Act. He points out that pursuant to the contract he and the State paid their respective contributions. Upon this contract he predicates his right to retain the disability payments made to him by System, together with the entire judgment he recovered from the third-party wrongdoer.
It must be conceded that Bilyeu's right to disability retirement payments is predicated upon an implied contract. His argument, however, overlooks one of the terms of the contract, namely, that should the wrongful act of a third party cause System to permaturely pay him retirement because of disability, System is subrogated to his cause of action against the wrongdoer. The contributions paid to System by the State pursuant to the contract were approximately three times greater than those paid by Bilyeu. The larger contributions by the State were required to provide for the contingency of premature retirement caused by disability. The contract which protects the employee against this contingency also protects System by providing for the right of subrogation if the disability is caused by a third-party wrongdoer. This protection to System lends soundness to the over-all plan and does not penalize the employee, he simply cannot recover twice for the same payments, once from System and again from the wrongdoer.
The foregoing discussion disposes of Bilyeu's suggestion that his position is analogous to that of an insurance policyholder. He overlooks that the insured pays the entire premium, the carrier contributes nothing. Here the employee paid one-quarter while the State contributed three-quarters of the payments into the retirement fund, which contributions are comparable to an insurance premium. The analogy does not hold.
Bilyeu also argues that the subrogation provisions of the Retirement Act constitute an unlawful assignment of a cause of action arising from a tortious injury to the person, citing Fifield Manor v. Finston, 54 Cal.2d 632, 7 Cal.Rptr. 377, 354 P.2d 1073, 78 A.L.R.2d 813. It is true that in Fifield Mr. Justice Dooling, by way of framing the question before the court, stated, at page 639, 7 Cal.Rptr. at page 381:
'We may therefore consider the question here presented to us as posing the problem whether a third party may be subrogated either by the operation of equitable principles (legal subrogation) or by contract with the injured party (conventional subrogation) to any part of a cause of action for injury to the person in view of the fact that under our law no such cause of action may be assigned.'
Later in the opinion, however, Mr. Justice Dooling pointed out that
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